Opinion ID: 660190
Heading Depth: 2
Heading Rank: 2

Heading: The Small Newspaper Exemption

Text: 35 Sections 6 and 7 of the FLSA guarantee most employees a minimum wage and overtime pay. 29 U.S.C. Secs. 206, 207. Section 13(a)(8) of the FLSA, however, exempts any employee employed in connection with the publication of any weekly, semi-weekly, or daily newspaper with a circulation of less than four thousand the major part of which circulation is within the county where published or counties contiguous thereto. 29 U.S.C. Sec. 213(a)(8). 36
37 Neither the statute nor the legislative history directly indicate under what circumstances a court should combine the circulations of related publications when applying the exemption. Moreover, there are no appellate decisions on point. Gateway finds support in two Wage and Hour Division opinion letters interpreting the exemption, while the Secretary relies on a forty-three year old district court opinion, McComb v. Dessau, 89 F.Supp. 295 (S.D.Cal.1950). Unfortunately, none of these authorities gives a reliable answer to this question. 38 The Wage and Hour Division opinion letters are from 1946 and 1965. Although the 1946 opinion letter indicates that a publisher of more than one newspaper may treat each paper separately for the purposes of determining whether the circulation is less than the maximum indicated in Sec. 13(a)(8), it qualifies this statement by stating that where the purported separate publications are properly to be regarded as one and the same newspaper, the total circulation of both papers would have to be considered in determining whether the exemption is applicable. 1948 Wage and Hour Manual (BNA) p 15:328. Thus the 1946 letter merely poses, without answering, the question presented here: what publications are properly regarded as the same newspaper?The 1965 opinion letter is not helpful either. As has been mentioned above, the 1965 letter states that when a company publishes more than one newspaper, each newspaper is tested separately in order to determine whether the circulation is less than four thousand, provided that, in addition to their separate mastheads, the several newspapers carry different local news items. Op. Letter No. 376, [1961-66 Transfer Binder] Lab.L.Rep. (CCH) p 30,988 (June 29, 1965). But what percentage of each paper needs to be local? Is a single local item sufficient? Or must all of the stories be different? The letter does not say, apparently because the Administrator deliberately wanted to leave the standard unclear, preferring instead to decide things on a case by case basis. Id. 7 39 More importantly, the 1965 opinion letter's different local news items standard seems to have been ignored in an opinion letter issued just four years later. A 1969 Wage and Hour Division opinion letter states that a publisher of a newspaper with a circulation of less than four thousand would not be exempt under Sec. 13(a)(8) because it printed a military newspaper with a circulation of more than four thousand. Op. Letter No. 973 [1676-72 Transfer Binder] Lab.L.Rep. (CCH) p 30,511 (March 27, 1969). 8 Despite the fact that the publisher did no more than handle the advertising and printing of the military newspaper and that only his printing employees worked on both papers, the administrator thought that the publisher could not have the circulation of the two papers counted separately for purposes of the exemption. Id. at p 30,512. The Wage and Hour Division said nothing about the different local news items standard. 40 We do not cite the 1969 opinion letter because its reasoning is more persuasive than the 1965 letter. Rather, the 1969 opinion letter merely illustrates the inconsistency and vagueness of the agency interpretations of this exemption. Normally we must give considerable weight to agency interpretations expressed in opinion letters. Pension Guaranty Corp. v. LTV Corp., 496 U.S. 633, 646, 110 S.Ct. 2668, 2676, 110 L.Ed.2d 579 (1990) (Chevron deference appropriate for opinion letters); see also, Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 842-43, 104 S.Ct. 2778, 2781-82, 81 L.Ed.2d 694 (1984); Skidmore v. Swift & Co., 323 U.S. 134, 140, 65 S.Ct. 161, 164, 89 L.Ed. 124 (1944). Such weight need not be given, however, when the interpretations are, like these, inconsistent, not contemporaneous to the enactment of the statute, and stale (the most recent one in this case being twenty-four years old). See Barnett v. Weinberger, 818 F.2d 953, 961-62, nn. 73 and 74 (D.C.Cir.1987) (marshalling the case law discussing the proposition that the prestige of a statutory construction by an agency depends crucially upon whether it was promulgated contemporaneously with enactment of the statute and has been adhered to consistently over time). See also Lynn Martin v. Occupational Safety and Health Review Commission, 499 U.S. 144, 111 S.Ct. 1171, 113 L.Ed.2d 117 (1991) (stating that the consistency of application of interpretations bears on the reasonableness of the agency's position under Chevron ); Batterton v. Francis, 432 U.S. 416, 425 n. 9, 97 S.Ct. 2399, 2405 n. 9, 53 L.Ed.2d 448 (1977) (explaining that [v]arying degrees of deference are accorded to administrative interpretations, based on such factors as the timing and consistency of the agency's position, and the nature of its expertise.). 9 41 The Secretary submits that we ought to follow the analysis in the Dessau case. In Dessau, the defendants published four weekly newspapers. 89 F.Supp. at 296. All of the writing, editorial and printing work was done from the same location by the same employees. Id. at 297-98. Each paper had a different masthead, and circulated among different groups of subscribers. Id. Otherwise, the papers were virtually identical. The court held that where a publisher published four papers from the same location, had the same employees working on each of them, made no distinction respecting payroll among the papers, and where the other papers had no real distinct corporate or business identity, the circulation of all four should be combined in determining whether the small newspaper exemption applied. Id. 42 Although Dessau is apparently the only case specifically discussing the question of when aggregation of the circulation of a publisher's different papers is appropriate, we believe that it is distinguishable. Unlike the papers in Dessau, the papers in the Gateway chain clearly have different stories, advertisements and editorial oversight. And although much of the content and operation of the Gateway papers is centralized, much of it is not. In addition, Dessau does not provide a clear framework for analyzing the question of when circulations should be aggregated. The two important facts listed in Dessau that apply to the Gateway newspapers--a lack of a separate corporate identity and the existence of a unitary employer/employee relationship--suggest something like a unitary business operations analysis. But it is not clear how such an analysis fits with the interpretation of the Wage and Hour Division that a single publisher can print more than one newspaper and still fall within the scope of the exemption. 10 We assume that at least some degree of centralization of business operations can occur without automatically requiring that the circulation of the different publications be aggregated. Unfortunately, Dessau does not indicate how much centralization is acceptable under the exemption, in part because it does not ground its analysis in the FLSA statutory scheme. 43 The Secretary attempts to overcome Dessau's shortcomings by combining Dessau with the Wage and Hour Division opinion letters and proposing a two part test: (1) whether the newspapers are properly regarded as one and the same based on their integrated operations, and (2) whether the newspapers contain different news items. [Secretary's Brief at 21]. Since this test is an interpretation created for purposes of this litigation, however, it is not entitled to deference. Bowen v. Georgetown University Hospital, 488 U.S. 204, 212, 109 S.Ct. 468, 473-74, 102 L.Ed.2d 493 (1988). Absent deference, the test is unconvincing, for it draws an artificial line between the operations of the newspapers and their contents, and it essentially makes the unified business operation of a publisher sufficient to remove all of the publisher's publications from the scope of the exemption. Under such an approach, no publisher of more than a single paper who takes advantage of some economies of scale in operating the papers would have the circulations of the papers counted separately for purposes of applying the exemption. 44 Having determined that none of the authorities cited by the parties specifically resolves whether the circulation of the different Gateway papers ought to be combined, we look for guidance to the history of the exemption and the general purposes of the FLSA. We also keep in mind that, because the FLSA is a remedial statute, the Supreme Court has long held that exemptions from the FLSA are to be narrowly construed against the employer. Arnold v. Ben Kanowsky, Inc., 361 U.S. 388, 392, 80 S.Ct. 453, 456, 4 L.Ed.2d 393 (1960). 11 As we explain below, we conclude that the FLSA's concept of enterprise provides the best analogy for determining to what extent a court should aggregate the circulation of different publications when applying the exemption. 45
46 The minimum wage and overtime requirements apply not only to employees who engage in commerce or in the production of goods for commerce, but also to employees of an enterprise engaged in commerce. 29 U.S.C. Secs. 206, 207. To be considered an enterprise, a business must satisfy three elements. It must 1) be engaged in related activities, 2) under unified operation or common control, and 3) have a common business purpose. 29 U.S.C. Sec. 203(r)(1); Cruz v. Chesapeake Shipping, Inc., 932 F.2d 218, 229 (3d Cir.1991). If a group of businesses has these three characteristics, the businesses will be treated as a single entity for purposes of applying the FLSA. 47 Congress introduced the concept of enterprise coverage in order to cope with the dramatic change in the nature of retail businesses between 1938 and 1960. Originally, the FLSA was designed to protect the employees of major industrial companies while leaving employees of small local businesses alone. In 1938, retailers were still mostly small local businesses, and they were largely excluded from the scope of the FLSA. By 1961, however, Congress recognized that much retailing was controlled by national chain-type stores, and enacted a bill modifying the FLSA to bring such stores within the scope of the FLSA. By amending the FLSA Congress hoped to update it to take account of the changes in the marketplace: 48 Just as the general store has long since disappeared as a symbol of retailing, the corner grocery store is quickly giving way to the supermarket.... The large mercantile establishments and national systems of chain stores which this bill would make subject to the Federal Wage-hour law bear little resemblance to the small retail businesses the original sponsors of the act sought to exclude. Their claim to be regarded as local retail merchants rests solely on the fact that they distribute and sell goods at retail, although they commonly buy at wholesale and operate in many States throughout the Nation. 49 S.Rep. No. 145, 87th Cong., 1st Sess. (1961) reprinted in 1961 U.S.C.C.A.N. 1620, 1645-46. By introducing the enterprise concept, which aggregated different entities into a single unit for purposes of the FLSA, the 1961 amendments to the FLSA brought the national retail chain stores and their employees within the scope of the FLSA. 50 Of course, Congress still wanted to keep truly local businesses outside the scope of the FLSA. So Congress made [a]mple provision ... to insure the original intent of the sponsors of the act to exclude the small local retail merchants such as the corner grocer, neighborhood drugstore, barbershop or beauty parlor [would be] carried out. 1961 U.S.C.C.A.N. at 1645-46. Congress did this by creating a mom and pop exclusion, see Martin v. Bedell, 955 F.2d 1029, 1032 (5th Cir.1992), requiring that an enterprise have gross sales of a certain amount for FLSA coverage to exist. At present, that amount is $500,000. 29 U.S.C. Sec. 203(s)(1)(A)(ii). 51 Under current law, the question often arises as to whether a business is above or below this dollar threshold. For example, if an entrepreneur owns three businesses, e.g. a gas station, a factory, and a bank, with each having gross sales of $200,000, it is necessary for the court to determine whether the sales of one, two or all three of the businesses should be combined to determine the applicability of the FLSA. 29 C.F.R. Sec. 779.211. The enterprise test is the way to determine whether to combine the dollar figures. See 29 C.F.R. Sec. 779.201. By using the three part test for enterprise, courts have a way to gauge the economic reality of a group of affiliated businesses for the purposes of applying the FLSA. See, e.g., Brock v. Hamad, Inc., 867 F.2d 804, 806-07 (4th Cir.1989) (three affiliated businesses--a lounge that featured topless dancers, an adult bookstore, and an x-rated video arcade--were an enterprise because they were all engaged in providing erotic entertainment to adults); Brock v. Executive Towers, Inc., 796 F.2d 698 (4th Cir.1986) (two affiliated businesses--one that managed an apartment complex and one that managed single family homes--were an enterprise). Cf. Griffin v. Daniel, 768 F.Supp. 532, 536-37 (W.D.Va.1991) (affiliated restaurant, grocery store and trailer park were not an enterprise). 12 52 The enterprise coverage concept aims at a distinction among businesses that is quite similar to the inquiry invited by the small newspapers exemption. If circulation figures are substituted for dollars, the problem of determining the application of the small newspaper exemption is the same as determining enterprise coverage. This is particularly true in this case in which we are called upon to apply the FLSA to a chain of newspapers. As we have noted, the enterprise concept was specifically introduced into the FLSA to deal with the problem of chains. 53 Use of the enterprise analysis as a rough framework for applying the exemption, not only has pragmatic appeal, but it also has support in the legislative history of Sec. 13(a)(8). In 1938, Congress was careful to restrict the scope of the FLSA so that small, local businesses--the butcher, the baker, the grocer--would not be required to pay minimum wages and overtime. The vast majority of employers in the retail trades were either not covered by the act because their employees were not deemed to be engaged in commerce or in the production of goods for commerce or were specifically exempted by the retail trade exemption. 13 But because it was common for local newspapers to be sent across state lines--to former residents or relatives--many local publishers were engaged in commerce and fell within the general scope of the FLSA. Without an exemption from the FLSA, the local publisher, who was really just as small and community-based as other small businesses, would have had to meet the requirements of the FLSA. 54 As the sponsor of Sec. 13(a)(8), Representative Creal of Kentucky, put it: 55 ... under this bill, because 1 to 2 percent of a paper's circulation goes outside to people who want to get the hometown paper to see whether or not Lucy got married, or whether Sally's baby has been born yet, because that infinitesimal bit of their business is with people outside the county, these publishers fall under the provisions of this bill, when on each side of this little printshop are the butcher and the baker, who are exempt and who are financially better fixed than he is. 56 83 Cong.Rec., 7445 (May 24, 1938). 14 See also Mabee v. White Plains Publishing Co., 327 U.S. 178, 183, 66 S.Ct. 511, 513, 90 L.Ed. 607 (1946). (The exemption of small weeklies or semi-weeklies seems to have been adopted on the assumption that without it a newspaper with a regular out of state circulation, no matter how small, would be under the act.). According to this legislative history, the small newspaper exemption is, at base, a provision to ensure that publishers will be treated the same as other businesses. 57 Using the enterprise concept when applying the small newspaper exemption seems to ensure an interpretation that is most consistent with this legislative history. If the original purpose of the small newspaper exemption is to be accomplished, publishers today ought to be treated no differently from other businesses. As has been mentioned, the enterprise approach distinguishes the large regional and national companies from those that are truly local, and it brings within its scope the chain-type businesses. To the extent that newspaper chains are like other types of chain businesses, then, the analysis under the FLSA should be the same. Otherwise, publishers would be treated more favorably under the FLSA than other businesses, and that would not be consistent with the purposes of the exemption. As this legislative history shows, the exemption was to make publishers equal to other businesses--not to make them better off. 58 Of course, application of the small newspaper exemption invites a somewhat different inquiry than the enterprise liability concept, and not just because its application is based on circulation levels, not dollar figures. We recognize that the enterprise concept is, at best, an analogy. Although the enterprise concept with the mom and pop exclusion and the small newspaper exemption may both be aimed at excluding small local businesses from the scope of the FLSA, the precise criteria for determining whether a business is local should be different depending on whether the business at issue is a small retailer or a small publisher. 59 We therefore emphasize at least one important difference between the enterprise inquiry in the FLSA generally and the small newspaper inquiry: fidelity to the statutory language of Sec. 13(a)(8) requires that the common business purpose consideration be applied at a fairly specific level. More precisely, the court should make sure that the publications have a common publishing purpose--a purpose that includes both business operations and editorial operations of the publications. This approach will ensure application of the small newspaper exemption in a way that is consistent with the Wage and Hour Division opinion letters which have said that a single publisher may have more than a single newspaper and still come within the scope of the small newspaper exemption. Under this approach, newspapers run by a single publisher which are in effect just different regional editions would have their circulations aggregated to determine the application of Sec. 13(a)(8), while those that are much more widely disparate would not. 60 Thus, in applying the small newspaper exemption to publishers of more than a single publication, the court should aggregate the circulation of those publications that are (1) related, (2) have a unified operation or control, and (3) have a common publishing purpose. In evaluating the first two factors, the focus should be on the different business operations of the publications. The court should look to see to what extent the publisher is taking advantage of significant economies of scale in running the publications. Particularly important would be the use of the same editorial staff and reporters for the different publications. Also important would be the degree to which the publications are after the same market niche in the different communities, the centralization of the publication decisions, the centralization of advertising sales, and other administrative functions of the publisher. The focus of the third consideration should be on the content of the papers--the extent to which the articles, advertisements, and editorials differ among the publications. Minor variations among the publications--different stories on only one page, for example--will not be enough require a court to measure their circulations separately. 61
62 Under the approach we make applicable here, at least some of the Gateway newspapers' circulations should have been aggregated. First, the Gateway newspapers are certainly engaged in related activities. All of the papers in the Gateway chain supply their different communities with local suburban news otherwise not supplied by the major metropolitan newspapers. The focus of all the papers is on the local happenings in the different communities. Each of the papers is similar in much the same way individual stores in a retail chain are similar. See 29 C.F.R. Secs. 779.206 and 207. 63 Second, the Gateway newspapers clearly satisfy the unified operation or common control requirement. Although the papers serve different communities, major decisions about administration and editorial policy are made from the central office in Monroeville: the publisher decides how many pages will be in each edition; all advertising is sold from the Monroeville office; Edith Hughes, the managing editor, oversees all editorial decisions for all nineteen papers; all employment-related decisions (hiring, firing, payroll) occur at the Monroeville office; and all printing is done at the Monroeville location. All other decisions seem to be made on a group-by-group basis: the newspapers in each group operate out of the same office and have the same editor; they have common operating budgets; and the papers within each group use the same reporters. In addition, Gateway uses the circulation numbers of the groups--not the individual papers--when selling its advertising space. 64 Third, the Gateway newspapers within each geographic group have a common publishing purpose. Although the papers within each of the five regional groups have some different local news items, they are otherwise identical. The first section has a few articles of local flavor, but other pages in the first section and the other two sections contain features, editorials and advertisements common to the other papers in the regional group. The papers within each group are just slight variations of each other. Indeed, they seem to be different editions of the same paper in much the same way major metropolitan daily papers have different regional editions. See, e.g., New Beat for Urban Newspapers: Zoned Editions with a Hometown Feel, The Wash. Post, Dec. 23, 1992 at A3. 65 In sum, each geographic group of newspapers clearly constitutes one newspaper under the three part test adopted here; hence the circulation figures of the papers within each geographic group should have been aggregated. It is unclear whether, under the test we announce, all nineteen of the papers in the Gateway chain have a common publishing purpose and should have their circulations aggregated. However, we do not need to reach that question here. Because it is undisputed that the circulation within each group is above four thousand, none of the Gateway papers are small newspapers within the meaning of Sec. 13(a)(8). Accordingly, the judgment of the district court must be reversed insofar as it found Gateway the beneficiary of the small newspaper exemption.