Source: https://caselaw.findlaw.com/us-supreme-court/361/388.html
Timestamp: 2019-04-22 13:07:23+00:00

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Petitioner sued respondent under 16 (b) of the Fair Labor Standards Act for payment of overtime wages claimed under 7. Respondent claimed exemption from the Act's overtime requirements as a "retail or service establishment" under 13 (a) (2), as amended in 1949. Respondent conducts an interior decorating and custom furniture business, but also fabricates on the same premises plastic aircraft parts which it sells in interstate commerce to manufacturers which incorporate them into aircraft or parts thereof which they sell to others. Sales of such plastic parts account for more than 25% of respondent's annual sales, and respondent introduced no evidence to prove that at least 75% of its sales were recognized in the industry as retail. Held: Respondent failed to satisfy the requirements of 13 and is not entitled to exemption thereunder. Pp. 389-394.
(a) That respondent's manufacture of plastic parts may be considered a "sideline" from respondent's viewpoint does not remove petitioner from coverage under the Fair Labor Standards Act unless respondent's activities fall within the specific exemptions enumerated in 13. P. 391.
(b) Since respondent, through its fabrication of such plastic parts, is making or processing the goods that it sells, it must comply with the requirements of 13 (a) (4), as well as 13 (a) (2), in order to be exempt. Pp. 392-393.
(c) Respondent failed to satisfy the requirements of 13 (a) (2), because sales of plastic parts accounted for more than 25% of its annual sales, and respondent introduced no evidence to prove that 75% of its sales were recognized in the industry as "retail." Pp. 393-394.
(d) The sale of parts to be incorporated into aircraft that were to be sold by the purchasers of such parts were sales for resale; and, since such sales exceeded 25% of respondent's total sales, respondent failed to meet the requirement of 13 (a) (2) that 75% of its annual sales be "not for resale." P. 394.
Submitted on briefs by Arthur J. Riggs for petitioner and G. H. Kelsoe, Jr. for respondent.
Bessie Margolin argued the cause for the United States, as amicus curiae. Solicitor General Rankin, Harold C. Nystrom, Bessie Margolin, Sylvia S. Ellison and Beate Bloch were on a brief for the Secretary of Labor, as amicus curiae, urging reversal.
This case concerns the provisions of the Fair Labor Standards Act of 1938 exempting from wages-and-hours coverage certain retail sales and service establishments. 1 The suit was brought by petitioner individually under 16 (b) of the Act for payment of overtime wages claimed under 7. The Court of Appeals for the Fifth Circuit reversed a District Court judgment for petitioner 2 and we granted certiorari, 359 U.S. 983 . The proceedings in this Court are in forma pauperis. Both sides submitted on [361 U.S. 388, 390] their briefs, and oral argument was heard only from the representative of the Secretary of Labor appearing as amicus curiae.
The District Court found that petitioner was engaged in the production of goods for commerce within the meaning of the Act, and upon respondent's admission that petitioner had been paid for overtime hours only at straight time rates, entered judgment for petitioner for unpaid overtime compensation plus an attorney's fee. The Court of Appeals reversed on the ground that respondent was exempt from the Act's overtime requirements under 13 (a) (2) as a "retail or service establishment."
Petitioner admittedly is engaged in the manufacture of phenolic parts for commerce. That this activity may be considered a "sideline" from respondent's viewpoint does not remove petitioner from coverage under the Fair Labor Standards Act unless the respondent's activities fall within the specific exemptions enumerated in 13 of the Act. As originally passed in 1938, the Fair Labor Standards Act exempted from coverage "any employee engaged in any retail or service establishment the greater part of whose selling or servicing is in intrastate commerce." 3 In 1949 Congress substituted a three-part definition for this provision. Any employee employed by a retail or service establishment's is to be exempt if more than 50% of the establishment's annual dollar volume of sales is made within the State, if 75% of its annual sales volume is not for resale, and if 75% of its annual sales volume is recognized within the industry as retail sales.
Turning to the facts of this case, it is clear that respondent, through its fabrication of phenolic parts, is "making or processing the goods that it sells." To gain exemption it therefore must comply with the criteria of 13 (a) (2) as they are incorporated by reference in 13 (a) (4), as well as the additional requirements of 13 (a) (4) itself. It is clear that respondent does not meet at least two of the three standards of 13 (a) (2) as included in 13 (a) (4).
We hold that respondent has not satisfied the requirements of 13 and is not entitled to exemption thereunder. The judgment of the Court of Appeals is reversed; the judgment of the District Court is reinstated; and the cause is remanded to that court for consideration of the prayer of petitioner for further counsel fees in accordance with the provision of the Act.
[ Footnote 1 ] 29 U.S.C. 213 (a), 63 Stat. 917, 13 (a). "The provisions of sections 6 and 7 shall not apply with respect to . . . (2) any employee employed by any retail or service establishment, more than 50 per centum of which establishment's annual dollar volume of sales of goods or services is made within the State in which the establishment is located. A `retail or service establishment' shall mean an establishment 75 per centum of whose annual dollar volume of sales of goods or services (or of both) is not for resale and is recognized as retail sales or services in the particular industry; . . . or (4) any employee employed by an establishment which qualifies as an exempt retail establishment under clause (2) of this subsection and is recognized as a retail establishment in the particular industry notwithstanding that such establishment makes or processes at the retail establishment the goods that it sells: Provided, That more than 85 per centum of such establishment's annual dollar volume of sales of goods so made or processed is made within the State in which the establishment is located; . . . ."
[ Footnote 2 ] The decision of the Court of Appeals is reported at 250 F.2d 47. Denial of rehearing is reported at 252 F.2d 787.
[ Footnote 3 ] 52 Stat. 1060, 1067.
[ Footnote 4 ] Mitchell v. Kentucky Finance Co., 359 U.S. 290, 294 .
[ Footnote 5 ] Id., at 293. See also the statement made by Senator Holland, manager of the amendment, during the debate in the Senate, 95 Cong. Rec. 12491; and the remarks of Representative Lucas, who introduced the amendment in the House, 95 Cong. Rec. 11116.
[ Footnote 6 ] Mitchell v. Kentucky Finance Co., 359 U.S. 290, 295 .
[ Footnote 7 ] Such cases as White Motor Co. v. Littleton, 124 F.2d 92 (C. A. 5th Cir. 1941), relied upon by the Fifth Circuit in its opinion in this case and decided at a time when there was no statutory definition of "retail or service establishment," no longer can have any vitality in view of the 1949 amendments. The extent to which the White Motor Co. decision rests on the absence of a statutory definition of "retail" is shown in 124 F.2d, at 93.
[ Footnote 8 ] Prior to the 1949 amendments to the Act, the whole area of manufacturing was excluded from the retail exemption. It had been repeatedly held that establishments engaged to any extent in manufacturing or processing activities could not qualify for exemption under former 13 (a) (2). E. g., Grant v. Bergdorf & Goodman Co., 172 F.2d 109 (C. A. 2d Cir. 1949); Fred Wolferman, Inc., v. Gustafson. [361 U.S. 388, 393] 169 F.2d 759 (C. A. 8th Cir. 1948); Walling v. Goldblatt Bros., 152 F.2d 475 (C. A. 7th Cir. 1945); Walling v. American Stores Co., 133 F.2d 840 (C. A. 3d Cir. 1943); Davis v. Goodman Lumber Co., 133 F.2d 52 (C. A. 4th Cir. 1943); Collins v. Kidd Dairy & Ice Co., 132 F.2d 79 (C. A. 5th Cir. 1942); see Roland Electrical Co. v. Walling, 326 U.S. 657, 666 -678. The Administrator's interpretation comporting with this view is to be found in Interp. Bull. No. 6, as revised and reissued June 16, 1941, 1942 WH Manual 326. The legislative history of the amendments, as reflected by statements of the sponsors and Committee Reports, clearly evidences that 13 (a) (2) as amended "does not apply to any manufacturing activities since any such activities, when conducted by a retail establishment, if exempt, are intended to be exempt under section 13 (a) (4)." Statement of the House Conferees, 95 Cong. Rec. 14932; see also the statements on the floor of Congress by the managers for the amendment in each House, Senator Holland and Representatives Lesinski and Lucas, 95 Cong. Rec. 12495, 14942, 11216.
[ Footnote 9 ] Remarks of Senator Holland, 95 Cong. Rec. 12502; remarks of Representative Lucas, 95 Cong. Rec. 11004, 11116; see also the [361 U.S. 388, 394] statement of the majority of the Senate Conferees, 95 Cong. Rec. 14877.
[ Footnote 10 ] See statement of the House Conferees, 95 Cong. Rec. 14932; statement of majority of Senate Conferees, 95 Cong. Rec. 14877; 29 CFR 779.15 (c) (Supp. 1959); cf. Mitchell v. Sherry Corine Corp., 264 F.2d 831, 834 (C. A. 4th Cir. 1959). As the cited legislative materials indicate, the exemption from the general "resale" rule for residence and farm construction repair and maintenance under 3 (n), 29 U.S.C. 203 (n), evinces an intent to classify other sales for use in articles to be sold as "resale."
Section 13 (a) of the Fair Labor Standards Act exempts from the wage-and-hour provisions of that Act employees of "any retail or service establishment," as there defined. See note 1 of the Court's opinion. Therefore, the entity to be considered is the "establishment." A single employer may conduct two (or more) "establishments," side by side or even under the same roof, one of which could be a "retail or service establishment," as defined in and exempted by 13 (a), and the other not. Here, respondent appears to have been separately engaged in three activities: (1) the manufacture and sale of phenolic, in which enterprise several persons - the number is not stated in the record - were employed, (2) an interior decorating business, commonly employing five persons, and (3) the custom manufacture and sale of furniture, employing a small, but varying, number of employees. During petitioner's employment by respondent - from October 17, 1954, through September 2, 1955 - he worked for a period in one of these enterprises and then in another, but, as the Court says, he worked primarily in the fabrication of phenolic parts. * Upon respondent's admission [361 U.S. 388, 396] at the trial, that petitioner had been paid for overtime hours worked only at straight time rates, the District Court, without any evidence showing the number of hours worked in the one as distinguished from the other of these enterprises, entered judgment for petitioner for overtime compensation for all overtime hours worked by petitioner, and an attorney's fee.
Although, as the Court correctly says, respondent, in its phenolic enterprise, was engaged in the production of goods for commerce and a major part of that production was sold for resale and, hence, that enterprise was not a "retail or service establishment," as defined in 13 (a), it appears that all of respondent's interior decorating services were rendered locally, and that all of the custom furniture manufacturing was done and the furniture sold locally and not for resale. And, therefore, it would appear - at least there is room for a finding - that respondent's interior decorating and custom furniture manufacturing and selling enterprises were "retail or service establishments," as defined in 13 (a). But, there is no finding by the District Court that these three enterprises were conducted by respondent in three "establishments" or in only one "establishment"; nor is there any finding as to what percentage of the interior decorating services were rendered locally, or what percentage of the custom furniture manufacturing and selling was done locally and not for resale.
Only if respondent's three enterprises constituted one "establishment" would there be support in the record for the judgment, and, as stated, there is no finding to that effect. The only oral argument made here was by counsel for the Department of Labor, as amicus curiae. Its position [361 U.S. 388, 397] is that, as a matter of law, respondent operated no more than two "establishments"; that the phenolic enterprise might be one "establishment," and it clearly was not a "retail or service establishment" as defined in 13 (a) (I agree that this is so); that the interior decorating and custom furniture manufacturing and sales enterprises might be another "establishment" - why these two enterprises might not be two "establishments" was not explicated. Its counsel then argues that, because some custom manufacturing of furniture was done in the latter "establishment," it could not, as a matter of law, be a "retail or service establishment" as defined in 13 (a). That argument would have had some force prior to the 1949 amendment to 13 (a) (63 Stat. 917), but it is in the teeth of that amendment, as clause 4 of the section, as then amended, provides that the wage-and-hour provisions ( 6 and 7) of the Act do not apply with respect to a "retail or service establishment" as defined "notwithstanding that such establishment makes or processes at the retail establishment the goods that it sells . . . ." (Emphasis added.) In the absence, as here, of essential evidence (showing the overtime hours worked in each of the several "establishments" - if more than one) and findings, I think the record does not support the judgment nor disclose the matters requisite to a decision of the question sought to be presented. I would, therefore, dismiss the writ as improvidently granted, or, at the very least, remand the case to the District Court for a new trial and for proper findings of fact on the determinative issues.

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