29 CFR § 776.22b - Guiding principles.
(a) Scope of bulletin and general coverage statement. This subpart contains the opinions of the Administrator of the Wage and Hour Division with respect to the applicability of the Fair Labor Standards Act to employees engaged in the building and construction industry. The provisions of the Act expressly make its application dependent on the character of an employee's activities, that is, on whether he is engaged “in commerce” or in the “production of goods for commerce including any closely related process or occupation directly essential to such production.” Under either of the two prescribed areas of covered work, coverage cannot be determined by a rigid or technical formula. The United States Supreme Court has said of both phases that coverage must be given “a liberal construction” determined “by practical considerations, not by technical conceptions.” 1 The Court has specifically rejected the technical “new construction” concept, as a reliable test for determining coverage under this Act. 2
2Mitchell v. Vollmer & Co., ante.
3Mitchell v. Vollmer & Co., ante; Cf. Armour & Co. v. Wantock, 323 U.S. 126.
(b) Engagement in commerce. The United States Supreme Court has held that the “in commerce” phase of coverage extends “throughout the farthest reaches of the channels of interstate commerce,” and covers not only construction work physically in or on a channel or instrumentality of interstate commerce but also construction work “so directly and vitally related to the functioning of an instrumentality or facility of interstate commerce as to be, in practical effect, a part of it, rather than isolated, local activity.” 4
(c) Production of goods for commerce. The “production” phase of coverage includes “any closely related process or occupation directly essential” to production of goods for commerce. An employee need not be engaged in activities indispensable to production in order to be covered. Conversely, even indispensable or essential activities, in the sense of being included in the long line of causation which ultimately results in production of finished goods, may not be covered. The work must be both closely related and directly essential to the covered production. 5
(d) State and national authority. Consideration must also be given to the relationship between state and national authority because Congress intended “to leave local business to the protection of the State.” 6 Activities which superficially appear to be local in character, when isolated, may in fact have the required close or intimate relationship with the area of commerce to which the Act applies. The courts have stated that a project should be viewed as a whole in a realistic way and not broken down into its various phases so as to defeat the purposes of the Act. 7
7Walling v. Jacksonville Paper Co., ante; Bennett v. V. P. Loftis Co., 167 F. (2d) 286 (C.A.4); Tobin v. Pennington-Winter Const. Co., 198 F. (2d) 334 (C.A.10), certiorari denied 345 U.S. 915; See General Coverage Bulletin, §§ 776.19 (a), (b), and 776.21(b).
(e) Interpretations. In his task of distinguishing covered from non-covered employees the Administrator will be guided by authoritative court decisions. To the extent that prior administrative rulings, interpretations, practices and enforcement policies relating to employees in the construction industry are inconsistent or in conflict with the principles stated in this subpart, they are hereby rescinded and withdrawn.
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