Source: https://supreme.justia.com/cases/federal/us/383/190/
Timestamp: 2019-04-22 04:56:02+00:00

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The common question presented by these two cases is the meaning of the phrase "retail or service establishment" as that language is used in the exemptive provisions of the federal wage and hour statute. We first set forth the statute and describe the two cases before us, then examine the history and content of the exempting clause, and finally apply the resulting analysis to the facts of each case.
(or of both) is not for resale and is recognized as retail sales or services in the particular industry."
Of the cases before us, the first one, No. 30, stems from two consolidated actions brought by the Secretary of Labor against Idaho Sheet Metal Works, Inc. (Idaho Sheet). By one action, the Secretary sought to enjoin future disregard of the Act's overtime provisions, and by the other he sought to collect on behalf of one employee unpaid overtime compensation for a period during the year 1960. See §§ 15-17, 52 Stat. 1068-1069, as amended, 29 U.S.C. §§ 215-217 (1964 ed.). The ensuing litigation established that Idaho Sheet operates a plant in Burley, Idaho, where it employs about 12 workers to fabricate, install, and maintain sheet metal products. Many articles are sold to individuals, farmers, and local merchants, the plant has display racks to show its wares, and about 60% of sales in number are said to be to "the general public," as opposed to industrial customers. About 83% of the gross income, however, is derived from metal work done on equipment used by five potato processing companies which dehydrate and freeze the potatoes for interstate shipment.
For its defense, Idaho Sheet denied its workers were engaged in or producing goods for interstate commerce. It also claimed to be an exempt retail or service establishment, adducing proof that over 75% of its dollar volume of sales was not for resale, and that its officials and salesmen who sell to it regarded the business as retail. The District Court held that Idaho Sheet was outside the interstate commerce coverage of the Act, and was, in any case, exempt. The Court of Appeals for the Ninth Circuit reversed on both points, and held in favor of the Secretary. 335 F.2d 952. We granted certiorari limited to the question whether Idaho Sheet was a retail or service establishment within the meaning of the Act. 380 U.S. 905.
In the other case before us, No. 31, the Secretary of Labor sued the Steepleton General Tire Company (Steepleton) and its president to require compliance with the minimum wage, overtime pay, and recordkeeping provisions of the Act. Steepleton, which is located in Memphis, Tennessee, and employs about 47 workers, is a franchised tire dealer engaged in the sale, recapping, and repair of tires. Some of Steepleton's income derives from dealings with private customers, but more than half the gross income comes from sales and repairs of tires furnished to businesses operating heavy industrial or construction vehicles or operating fleets of trucks; apparently a sizable though unspecified portion of these commercial customers operated their equipment in interstate commerce.
The District Court determined that Steepleton came within the interstate commerce coverage of the Act, and that issue is no longer in the case. Alleging itself to be exempt under § 13(a)(2), Steepleton showed that 75% or more of its sales were not for resale, and that the industry's predominant and longstanding use of the word "retail" applied that term to all tire sales not for resale, despite the commercial character of the tires and the established pattern of quantity discounts. The only explanation offered for this use was that it conformed to many state sales tax statutes. The Secretary showed that the industry sometimes used the word "retail" in other senses that excluded commercial sales, and that commercial customers of Steepleton did not regard their purchases as retail transactions. The District Court held Steepleton to be entitled to the exemption. The Court of Appeals for the Sixth Circuit affirmed the District Court in all respects, 330 F.2d 804, and we granted certiorari at the behest of the Secretary to consider whether Steepleton qualified as a retail or service establishment. 380 U.S. 904.
The approach of the Sixth Circuit, which took industry usage as controlling, and that of the Ninth Circuit, which rejected it as the sole test, represent irreconcilable interpretations of the critical statutory language. While support can be mustered for both views, we believe the Ninth Circuit is correct, and, on this point, follow our earlier decision in Mitchell v. Kentucky Finance Co., 359 U. S. 290. After rejecting the industry's usage as controlling, we face the further difficult question of what criteria do determine when business transactions are retail under the Act; to this question, it is still less easy to return a clear-cut answer, but our analysis of the matter leads us to conclude that neither Idaho Sheet nor Steepleton qualifies as a retail or service establishment.
goods or services to businesses or state agencies remained retail if sold at the normal price charged private consumers or in quantities a private consumer would buy. See Interp.Bull.No.6, 14, in 1942 WH Manual, p. 330. However, there were deviations from this consumer goods standard in favor of employers, notable instances being the exemption of farm implement dealers and linen supply firms supplying commercial customers. See Statements of the Administrator in 1944-1945 WH Manual, pp. 469-470.
In 1946, this Court decided Roland Electrical Co. v. Walling, 326 U. S. 657, holding, inter alia, that a business engaged in commercial wiring, electrical contracting for industry, and repair and replacement of electric motors and generators did not constitute a retail or service establishment. The opinion used considerable language suggesting that no sale of any article for business or profit-making use, as opposed to personal consumption, could qualify as a retail sale, a position which supported the result but went far beyond a necessary holding. See 326 U.S. at 326 U. S. 673-677. This case, and several others in this vein, [Footnote 7] prompted the Administrator to report to Congress that certain hitherto exempt classes of business were endangered -- notably farm equipment dealers -- and to recommend amending legislation. See 1948 Wage and Hour Division, Annual Report, pp. 120-121.
applies; courts are not incompetent to distinguish between a legitimized usage fixed by established practice and one recently instituted with the aim of avoiding the law.
On balance, however, the arguments against this literal reading are more persuasive. At the start, such a reading would attribute to Congress a purpose going well beyond its reiterated explanation that the amendment was designed to overturn the sweeping principle of the Roland case. The legislative history is replete with evidence that the target of the amendment was Roland's proposition that no sale to a business purchaser could be a retail sale, which Senator Holland condemned by comparing the different status it gave to the sale of a batch of towels to a housewife and the same sale to a hotel-keeper. 95 Cong.Rec. 12494. [Footnote 13] Further, for every suggestion in the debates that Congress intended also wholly to revamp the exemption by substituting an overriding industry usage test, there are statements that point in the other direction. Thus, Senator Holland observed that his amendment would not undo the commonly held view that quantity sales at discount prices are generally nonretail. [Footnote 14] It was said that the "recognizing"
The conclusive consideration for us in rejecting the industry usage test is that it would compel results flatly inconsistent with those Congress explicitly contemplated, and might indeed work a major revolution in the Act's coverage not acknowledged in any legislative statement or report before us. The prime example of this threatened inconsistency is the problem presented to this Court in 1959 by Mitchell v. Kentucky Finance Co., 359 U.S.
"[t]he amendment does not exempt banks, insurance companies, building and loan associations, credit companies, newspapers, telephone companies, gas and electric utility companies, telegraph companies, etc., because there is no concept of retail selling or servicing in these industries."
House Conf.Rep., pp. 25-26. See Senate Conf. Majority Statement, 95 Cong.Rec. 14877. If weight is to be given to statements about the nonretail status of quantity sales at discounts, see n 14, supra, congressional intent would be similarly frustrated by the truck tire industry's retail designation of all sales not for resale no matter how great the quantity and discount. In view of the use of the word "retail" in the truck tire and credit industries, it would hardly be surprising to find that newspaper, telephone, or gas and electric companies label their sales to consumers as retail. Yet the legislative history is so explicitly opposed to the extension of the retail exemption to such businesses as to provide the final argument against adopting an industry usage test that could dictate that result.
necessary to determine the terms or circumstances that make a sale of those goods or services a retail sale.
"by the grocery store, the hardware store, the coal dealer, the automobile dealer selling passenger cars or trucks, the clothing store, the drygoods store, the department store, the paint store, the furniture store, the drugstore, the shoe store, the stationer, the lumber dealer, etc. . . ."
House Conf.Rep., p. 25 (sale of farm machinery is another example given). See also 95 Cong.Rec. 11003-11004 (remarks of Mr. Lucas); 95 Cong.Rec. 12502 (remarks of Senator Holland). Of course, Congress' conceded intent to overrule the Roland principle means sales of such goods or services can be retail "whether made to private householders or to business users," House Conf.Rep., p. 25, but the goods and services listed nearly all share the common characteristic that they are often purchased by householders. The legislative recital of telephone, gas and electric, and credit companies along with a number of others as businesses outside the exemption, see p. 383 U. S. 202, supra, demonstrates that not everything the consumer purchases can be a retail sale of goods or services, but the breadth of this qualification need not here be explored.
e.g., 95 Cong.Rec. 12497 (remarks of Senator Holland) and confirmed by the presence of another exemption in the Act that would otherwise be difficult to understand. [Footnote 16] See also 95 Cong.Rec. 12495 (remarks of Senator Holland) (retailability of modest office desk). We cannot draw a precise line between such articles and those, like industrial machinery, which can never be sold at retail, see House Conf.Rep., p. 26, but a few characteristics of items like small trucks and farm implements may offer some guidance: their employment is very widespread, as is that of consumer goods; they are often distributed in stores or showrooms and by means not dissimilar to those used for consumer goods; and perhaps it can be said that they are very frequently used in commercial activities of limited scope. While the list of strictly commercial items whose sale can be deemed retail is presumably very small, their existence precludes use of the uncomplicated "consumer goods" test proposed by the Administrator in 1949. See pp. 383 U. S. 197-198, supra.
be given conclusive force. The legislative comments on discounting just cited are to the contrary, and the statute cannot easily be read to make usage control whether a particular sale is retail after we have rejected that test in deciding whether sale of a given item can ever be retail. The Secretary has, in fact, quite properly looked carefully at usage and practice in each industry before taking a position, 29 CFR § 779.323 (1965), but he cannot be hamstrung by the terminology of a particular trade. In view of the diversity of structure and marketing practices in different industries, flexibility is certainly appropriate, and we do not here further attempt to adduce general rules. We do note that the considerable discretion possessed by the Secretary as the one responsible for the actual administration of the Act should not be understressed. Boutell v. Walling, 327 U. S. 463, 327 U. S. 471; see United States v. American Trucking Assns., 310 U. S. 534, 310 U. S. 549.
25% of the dollar volume may derive from sales designated nonretail without loss of the exemption. See n 2, supra. In this instance, 83% of the gross income is made by sale or servicing of the potato processing equipment, and we do not believe those transactions before us can be labeled retail, whatever the particular terms.
in the sale and servicing of manufacturing machinery and manufacturing equipment used in the production of goods,"
which the House Conference Report flatly stated could not be exempt. House Conf.Rep., p. 26. Since, in our view, this potato equipment cannot be the subject of a retail sale, we have no occasion to consider the company's claim that the pricing and quantity of its particular sales of the equipment conform to retail standards.
The second case, involving the Steepleton tire business, is in some respects more intricate. The Government has alleged, and Steepleton does not deny, that better than half the company's dollar volume derives from sales to companies operating fleets of commercial vehicles and other heavy industrial machinery such as earth-moving equipment. The Government's first ground for withholding the exemption is that tire transactions relating to large trucks and industrial vehicles are intrinsically nonretail, whatever the terms. It analogizes these vehicles to industrial machinery, and then would treat the tires just as the trucks. And it stresses the ties between these vehicles and interstate commerce.
kind, no doubt turning in part on problems of administration and facets of industry practice, clearly implicates the Secretary's discretion, and we see no cause to disturb its exercise in this case.
Steepleton is, nevertheless, deprived of the retail establishment exemption because -- as the Government alternatively contended -- it has failed to show that the tire dealings in question were made on terms and in circumstances that qualify them as retail within the Secretary's guidelines. The guidelines class as nonretail all sales to fleets of five or more vehicles at "wholesale prices," a wholesale price being defined as that charged on sales for resale or on sales to 10-vehicle fleets. See n 18, supra. These guidelines, reportedly designed after inquiry into industry practices, are quite evidently aimed at excluding from the retail category sales generally made at significant discounts and in quantity. Given the common conception of the term retail and references in the legislative history to discount sales, see n 14, supra, we see no reason not to sustain these guidelines; indeed, the company does not even appear to discuss them, save as is implicit in its claims that the Secretary's position here does not correspond to word usage in the industry.
the sales were to large fleets, that a number of purchasers said they received discounts, that the practice in the industry was to grant significant discounts for fleet sales, that some sales were for resale or pursuant to bids to public agencies, and pointed out other facts directed at showing nonexemption under the guidelines. Despite this evidence, there is unclarity as to the precise percentages of dollar volume attributable to the various sales that the guidelines label nonretail. However, the burden of proof respecting exemptions is upon the company, as earlier indicated, and, since, we uphold the Secretary's test, that burden has not been met. If Steepleton had alleged on appeal that it could meet the Secretary's standards if they prevailed, even then we would hesitate to order a remand, since the Secretary's position has been known from the outset. In all events, Steepleton has not even claimed in this Court that the Secretary's standards could be met.
The judgment of the Court of Appeals in No. 30 is affirmed; the judgment of the Court of Appeals in No. 31 is reversed.
52 Stat. 1060, as amended, 29 U.S.C. §§ 201-219 (1964 ed.). Sections 6, 7, codified as §§ 206, 207, respectively cover minimum wages and overtime pay. The commerce coverage of the Act, through a special definition of "production," is drawn in generous terms. See § 3(j), codified as § 203(j).
"(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, if such establishment --"
". . . [meets one of four tests, designated '(i)-(iv)' and framed with reference to another section of the Act]."
"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."
This requirement has been met by the companies in this case. Section 13(a)(4) of the Act, added in 1949 by 63 Stat. 917, 29 U.S.C. § 213(a)(4) (1964 ed.), provides that an establishment that makes or processes the goods it sells may qualify as exempt if it meets the tests of § 13(a)(2) and "is recognized as a retail establishment in the particular industry" and makes more than 85% of its annual dollar volume of sales of such goods within the State. So far as the companies in this case may be deemed to make or process the goods they sell, the Government is apparently satisfied that the added requirements of § 13(a)(4) have been met, or at least is unwilling to rely upon them.
These four tests were added to § 13(a)(2) in 1961 by 75 Stat. 71. The Government has not suggested that this amendment would disqualify either of the companies in the present case.
"(a) The provisions of sections 6 and 7 shall not apply with respect to . . . (2) any employee engaged in any retail or service establishment the greater part of whose selling of servicing is in intrastate commerce."
This Bulletin, designated No. 6, appears along with other official statements in various editions of the BNA Wage and Hour Manual (hereafter cited as WH Manual), e.g., 1942 edition. The Secretary's present views are stated in 29 CFR §§ 779-779.515 (1965).
See Martino v. Michigan Window Cleaning Co., 327 U. S. 173; Boutell v. Walling, 327 U. S. 463. See also McComb v. Factory Stores Co., 81 F.Supp. 403; McComb v. Diebert, 16 CCH Labor Cas. ¦ 64,982.
The bill reported out of committee was H.R. 3190, 81st Cong., 1st Sess., accompanied by H.R.Rep. No. 267. The first substitute was H.R. 5856, brought to debate by H.Res. 183. The final, successful version retained the number H.R. 5856, but was drawn from H.R. 5894. See generally 6 Lab.Rel.Rep., p. 90:459 (1961).
The only difference between the 1949 version of § 13(a)(2) and current law derives from the 1961 amendment to the section, which is not relevant in this case. See n 4, supra, and accompanying text.
The bill reported out of committee was S. 653, 81st Cong., 1st Sess., accompanied by S.Rep. No. 640, U.S.Code Congressional and Administrative News 1949, p. 2241. The amendment was offered at 95 Cong.Rec. 12491 and passed at 95 Cong.Rec. 12520.
The principal debates appear at various points in 95 Cong.Rec. 11002-11203 (House), 12490-12520 (Senate). No initial committee reports discuss the ultimately successful version of § 13(a)(2), but a pertinent statement of the House members of the conference committee appears in H.R.Conf.Rep. No. 1453, 81st Cong., 1st Sess., pp. 24-26 (hereafter cited as House Conf.Rep.). There is also a relevant but less authoritative statement of the majority of Senate conferees (hereafter cited as Senate Conf. Majority Statement), appearing at 95 Cong.Rec. 14877.
Other comments in some measure favoring the most literal construction are those assuming that each industry has an established understanding of what is a retail sale, e.g., 95 Cong.Rec. 12502 (remarks of Senator Holland), 12516 (remarks of Senator Taft); those few which seem to equate "recognized as retail" with "regarded as retail," 95 Cong.Rec. 11003 (remarks of Mr. Lucas, sponsor of the prevailing version in the House), 12502 (remarks of Senator Holland); and one or two suggesting that a discount sale may qualify as retail, 95 Cong.Rec. 11003 (remarks of Mr. Lucas), 11199 (remarks of Mr. McConnell).
See House Conf.Rep., p. 24 ("This clarification (the amended § 13(a)(2)) is needed in order to obviate the sweeping ruling of the Administrator and the courts that no sale of goods or services for business use is retail. See Roland Electrical Co. v. Walling. . . ."); 95 Cong.Rec. 11003 (remarks of Mr. Lucas); 95 Cong.Rec. 11203 (remarks of Mr. Celler).
"If sales were made in sufficient quantity so there would be a discount and they would be regarded not as retail sales, but as wholesale sales, they would lose their exemption."
95 Cong.Rec. 12497. See also 95 Cong.Rec. 12505. But cf. 95 Cong.Rec. 11003 (remarks of Mr. Lucas).
"MR. DOUGLAS. I understand that the interpretation which would be made would be that given to 'retail sale' by a trade association."
"Mr. HOLLAND. That is one criterion, of course, but I do not believe the Senator from Illinois, and certainly not the Senator from Florida, would wish to delegate full authority in the matter to a trade association or any other interested group."
95 Cong.Rec. 12501. See also 95 Cong.Rec. 12510 (remarks of Senator Holland).
"any employee of a retail or service establishment which is primarily engaged in the business of selling automobiles, trucks, or farm implements,"
regardless of whether the establishment meets the further tests of § 13(a)(2), notably those added in 1961, see n 4, supra, and accompanying text. Quite evidently, this section contemplates that a business primarily selling trucks may be a retail establishment.
The company relies upon Wirtz v. Modern Trashmoval, Inc., 323 F.2d 451, in which the Fourth Circuit, as an alternative ground of decision, held a trash collection business to be a retail or service establishment under the Act. We need go no further than to say the case is quite distinguishable; trash removal is not only a widespread need in the commercial world, but is required by private families.
"(d) Sales to fleet accounts at wholesale prices: . . . a 'fleet account' is a customer operating five or more automobiles or trucks for business purposes. Wholesale prices . . . are prices equivalent to, or less than, those typically charged on sales for resale. . . . If the establishment makes no sales of truck tires for resale, the wholesale price . . . [is] the price charged . . . on sales of truck tires to fleet accounts operating 10 or more commercial vehicles, or if the establishment makes no such sales . . . , [it is] the price typically charged in the area on [such] sales. . . ."
Idaho Sheet Metal Works, Inc.

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