Once again we are presented with a nice question concerning the scope of the Fair Labor Standards Act, as amended. 63 Stat. 912, 29 U.S.C. § 207, 29 U.S.C.A. § 207. The respondent, a construction contractor, was engaged by the Lower Nueces River Water Supply District (hereafter to be called the District) to construct a dam and impounding facilities on the lower Nueces River in Texas at a cost of about $6,000,000, in order to increase roughly tenfold the District's then-existing reservoir capacity. The dam is not a multi-purpose project; its sole purpose is to create an expanded reservoir for the District. The water impounded by the District is supplied to consumers locally, within the State of Texas. The site of the new dam was chosen 1,400 feet downstream from the old, with the expectation that upon completion of the new construction the old dam would be inundated and thus replaced by the greatly expanded reservoir. In the interim until completion, the old facilities could serve to assure a continuing water supply.
The District, though for some purposes an independent governmental agency under Texas law, may here be dealt with simply as the water supply system of the included City of Corpus Christi. Its contract with the City requires it to supply the City with the entire water output; and the City in turn agrees to operate and maintain the completed dam and impounding facilities and to supply water to consumers within the District, but outside city limits. It is conceded that between 40% and 50% of all water consumption from the system is accounted for by industrial (as distinguished from residential, commercial, hospital, municipal and other) users, most of whom produce goods for commerce, and that water is essential to their operations. Nor is it contested that an unspecified amount of the water supplied by the District is consumed by facilities and instrumentalities of commerce.
It is agreed that as to the employees here involved-those actually engaged in construction work on the dam-the respondent failed to comply with the requirements of § 7 of the Act, if it is applicable.
On the basis of its applicability the Secretary of Labor sought an injunction in the United States District Court for the Southern District of Texas. That court granted the injunction, on two grounds of coverage: (1) since water from the system is supplied to facilities and instrumentalities of commerce, those engaged in building the dam are engaged in the production of goods-water-for commerce; and (2) since the water supplied is essential to industries in Corpus Christi producing goods for commerce, construction of the dam is an occupation 'closely related' and 'directly essential' to the production of goods for commerce. While the District Court conceded 'that Congress intended to narrow the scope of coverage' by the 1949 amendment of the statutory definition of 'produced' in § 3(j), 63 Stat. 911, 29 U.S.C.A. § 203(j), it concluded that this employment remained within the coverage of the Act.
On appeal the Court of Appeals for the Fifth Circuit reversed. 262 F.2d 546, 550. It disposed of the first ground of the District Court's decision by holding that the building of a dam could not itself constitute the production of goods for commerce, whatever the use to which the impounded water might be put. In disposing of the second, it invoked a rule that 'those engaged in building a plant to be used for the manufacturing of goods do not even come within * * * the * * * statutory definiton * * *.' It concluded that under such a rule there could be no coverage of employees engaged in construction of a facility which was not to engage in, but merely to support, the manufacture of goods for commerce. It concluded further that the 'remoteness' of these jobs from production justified their exclusion from coverage. Both conclusions reflected its general view that 'the amendment of 1949 made even more restrictive the definition of production of goods' than it was under the Act of 1938, when it substituted the words 'directly essential' for the word 'necessary,' and added the requirement that the employment be 'closely related' to production.
We brought the case here, 361 U.S. 807, 80 S.Ct. 52, 4 L.Ed.2d 57, because of an asserted conflict between circuits. See Chambers Construction Co. v. Mitchell, 8 Cir., 233 F.2d 717, and Mitchell v. Chambers Construction Co., 10 Cir., 214 F.2d 515.