Court Opinion

ID: 9473934
Source: CourtListenerOpinion
Date Created: 2023-08-05 04:43:57.208377+00
Date Added: 2024-06-11T17:43:49.620309
License: Public Domain

NELSON, Circuit Judge,
dissenting:
I respectfully dissent. Neither the plain language of the statute nor the case law provides adequate support for the result reached by the majority. Construing the FLSA broadly in accordance with Supreme Court directives, I would hold that the FLSA applies to the Tucson Air Museum (“Museum”) because it is an “enterprise” which “is an activity of .a public agency” under 29 U.S.C. § 203(s)(6).
The FLSA is a remedial statute which protects employees engaged in interstate commerce by guaranteeing them such things as a fair minimum wage and overtime pay. See 29 U.S.C. § 206(a). This Circuit has accordingly given a liberal in*1313terpretation to FLSA sections. See, e.g., Bonnette v. California Health & Welfare Agency, 704 F.2d 1465, 1469 (9th Cir.1983) (adopting “expansive interpretation” of term “employer” in order to effectuate FLSA’s broad remedial purposes) (citing Real v. Driscoll Strawberry Associates, Inc., 603 F.2d 748, 754 (9th Cir.1979)). As the Supreme Court recently stated, “[t]he Court has consistently construed the [FLSA] ‘liberally to apply to the furthest reaches consistent with congressional direction’ ... recognizing that broad coverage is essential” to accomplish the FLSA’s purposes. Tony and Susan Alamo Foundation v. Secretary of Labor, — U.S. ---, 105 S.Ct. 1953, 1959, 85 L.Ed.2d 278 (1985) (quoting Mitchell v. Lublin, McGaughy & Assoc., 358 U.S. 207, 211, 79 S.Ct. 260, 264, 3 L.Ed.2d 243 (1959)). The majority’s analysis not only ignores this fundamental canon of FLSA interpretation, it runs counter to it.
This is evidenced by the majority’s overly restrictive interpretation of section 3 of the FLSA, 29 U.S.C. § 203. Section 203(s) defines “enterprise engaged in commerce” as one which is involved in interstate commerce and which satisfies one of six other criteria. The sixth of these is that the enterprise “is an activity of a public agency.” The preceding three grounds for coverage are that the enterprise “is engaged in” the clothing business, “is engaged in” construction, or “is engaged in” the operation of a hospital or school. 29 U.S.C. §§ 203(s)(3), (4), (5). In section 203(x), “public agency” is defined, but “activity of a public agency” is not.
The plain language of the statute convinces me that one need not actually be a “public agency” as defined in section 203(x) in order to be an “enterprise” which “is an activity of a public agency” under section 203(s)(6). If Congress had wished to limit this section’s coverage to public agencies, it could have easily made clear its intention to do so. It could have continued the “is engaged in” form, used in the three preceding paragraphs, by writing paragraph (6) to say “is engaged in by a public agency.” Alternatively, the section could have said “is a public agency.” A third simple option would have been for Congress to define “activity of a public agency” as “those activities performed by” the governmental units defined as “public agencies.” Instead, Congress chose to say “is an activity of a public agency.” Because I believe the word “activity” must be given some meaning, I must conclude that Congress meant to extend the coverage of section 203(s)(6) beyond those entities falling into the narrow statutory definition of “public agency.”
Logically, then, our main analytical focus must be on the nature of the activity rather than the nature of the entity. The majority’s reliance on the guidelines articulated in Williams v. Eastside Mental Health Center, 669 F.2d 671 (11th Cir.), cert. denied, 459 U.S. 976, 103 S.Ct. 318, 74 L.Ed.2d 294 (1982), and Skills Development Services, Inc. v. Donovan, 728 F.2d 294 (6th Cir.1984), is misplaced for that reason. Those cases analyzed whether the tenth amendment barred application of the FLSA to private entities claiming to be “state agencies;” thus, the primary focus in those cases was properly on the nature of the entities themselves.
The unique historical context of these cases cautions strongly against relying on them here. In 1974, Congress expanded the FLSA’s definition of “employer” to include “a public agency” and expanded the definition of “enterprise” to include “an activity of a public agency.” National League of Cities v. Usery, 426 U.S. 833, 838, 96 S.Ct. 2465, 2468, 49 L.Ed.2d 245 (1975). Very soon thereafter, the constitutionality of these amendments was challenged as applied to the “traditional functions” of state government. Id. at 838-39, 96 S.Ct. at 2468. The Court held that this extension of the FLSA was indeed unconstitutional as applied to the states’ “integral operations in areas of traditional government functions.” Id. at 852, 96 S.Ct. at 2474.
Armed with the National League of Cities holding, the private entities in both *1314Williams and Skills Development argued, unsuccessfully, that they were exempt from FLSA coverage on tenth amendment ^grounds. In Williams, the court said that
[t]he defendant-appellee Eastside Mental Health Center claims exemption ... under the principles set out in [National League of Cities ]. Appellee asserts that [.National League ] requires FLSA exemption for all state or public agencies performing traditional public functions. The appellee argues that because East-side is so thoroughly allied with the State of Alabama, and furthermore because it is engaged in an ordinarily public function, ... the [National League ] test has been satisfied and exemption is appropriate. We disagree____
669 F.2d at 675 (emphasis added). Construing this constitutional exemption narrowly, the Williams court adopted the test used by the NLRB in “cases involving the issue of whether a particular entity is a political subdivision and is therefore exempt from provisions of the National Labor Relations Act..” Id. at 677 (emphasis added). The court applied this “political subdivision” test, which emphasizes the power of public officials, or the public generally, to remove the entity’s administrators, in order to analyze the question whether the mental health center was “an arm of the state.” Id. at 679. Because public officials lacked that power, the court concluded that the center “is not a state agency or a political subdivision of a state,” and was therefore not exempt, on tenth amendment grounds, from the FLSA. Id. The court emphasized that “[t]he determinative fact in this case is simply that the entity with which we are dealing is not a state or a political subdivision as defined by the Court in [National League of Cities ] and other cases involving similar issues.” Id. at 678 (emphasis added).
In Skills Development, the Sixth Circuit faced a virtually identical question: whether “private corporations providing services to the mentally retarded under contracts with the State of Tennessee” were exempt from FLSA regulation under National League of Cities. 728 F.2d at 296. Citing Williams, the court concluded that
regulating the Contractors would not regulate a state, state agency, or political subdivision of a state. The Contractors are clearly not states, and the contracts that create their relationship with the state show that the parties did not intend that the Contractors be considered state agencies.
Id. at 299. The court applied the NLRB’s “political subdivision” test, following Williams, explaining that “ ‘the rationale for the ‘political subdivision’ test has its ultimate basis in Tenth Amendment consideration of state sovereignty and the Eleventh Amendment grant of judicial immunity to the states.’ ” Id. at 299 n. 5 (quoting Crestline Memorial Hospital Association v. NLRB, 668 F.2d 243, 245 n. 1 (6th Cir.1982)). The court concluded that “[t]hese tenth amendment considerations make the NLRB test relevant here.” 728 F.2d at 299 n. 5 (emphasis added).
By utilizing the test from Williams and Skills Development, the majority thus applies a tenth amendment-based set of considerations to a case that has nothing to do with the tenth amendment. After Garcia v. San Antonio Metropolitan Transit Authority, — U.S. ---, 105 S.Ct. 1005, 83 L.Ed.2d 1016 (1985) (overruling National League of Cities), I simply fail to grasp the relevance for our purposes of the “political subdivision” test. Because I believe that an entity need not be a “state, state agency or political subdivision of a state” in order to be considered an “enterprise” which “is an activity of a public agency,” I also believe that the use of this tenth-amendment based test leads to a far too restrictive application of the statute.
In this case, I conclude that the Museum is indeed an “activity of a public agency” whose employees should receive the benefits of FLSA coverage on that basis. The Museum’s day-to-day activity and very existence is determined in whole or part by Pima County. This is clear from a detailed look at the contract between the Museum and the County. Because, the majority *1315opinion summarizes this relationship only briefly, and because it is so crucial to my conclusion, I recite its key features in more detail.
As consideration for the County’s grant of the “exclusive right and duty to operate the public park,” the Museum promises to maintain and operate the facility “at its own expense.” But the County reserves the right to terminate the agreement at the end of its term, and at that time “all exhibits shall be surrendered to the County.” The County sets admission fees and approves all concessionaires, and may withhold approval for any reason of any “lease of concessions.” The County sets the general fee schedule and must approve hours of operation. The Museum must open its premises to County inspectors “at all reasonable times.” The County is empowered to terminate the agreement upon written notice if any of a number of stated conditions occur.
The County maintains similar control over improvements to the Museum. No improvements may be made without written approval by the County, which “may withhold approval for any reason whatsoever.” Permanent improvements are County property. The Museum is prohibited from taking actions which adversely affect the environment. It cannot, without County approval, erect advertising signs. The County is given the “right to construct and maintain upon the premises facilities for the public use.”
The County also maintains close control over the Museum’s finances. The agreement states that “[a]ll revenues whatsoever ... shall be used solely for the operation, maintenance, development and improvement of the museum” and that all expenditures and salaries must be such that “encourage the growth of a museum” rather than deplete its resources. Similarly, all profits must be used solely for the “operation, maintenance, improvement and development” of the Museum. The Museum is instructed to use only County-approved accounting methods, must submit annual financial statements to the County, and must open its books for inspection and audit by the County “at all reasonable times.” The Museum must submit annual budgets to the County, which “has the right to direct changes in said budget.” Accounting records must be “adequate to enable [the] County to determine the level of County financial support necessary to the operation and development of the Air Museum.”
As to hiring, the County agrees to provide the Museum with “two full-time County employees” for two years from the date of the agreement, after which time the “County may, in its discretion, extend the employment of the two employees at the Museum for a period which the County deems necessary and proper under the circumstances.” The Museum further agrees to follow non-discriminatory hiring practices. Control over the work force is otherwise left to the Museum in its purported capacity as an “independent contractor:” the Museum shall “employ and direct such personnel as it requires.”
Despite all these indicia of County control, the majority today adopts a rule which focuses on two factors: that the Museum’s officials are not “directly responsible to public officials or to the general public,” and that the Museum is labeled an “independent contractor.” By so doing, the majority authorizes governmental entities which, after Garcia, — U.S. ---, 105 S.Ct. 1005, 83 L.Ed.2d 1016, clearly would be subject to the FLSA were they to operate facilities themselves, to avoid paying minimum wage and overtime by engaging an “independent contractor” to operate the facilities. As long as the magic words “independent contractor” appear in the contract, and as long as public officials or the general public cannot remove the contractor’s administrators, the governmental unit can exert as much control as it desires — including, as here, providing as much financial support as necessary for the contractor’s continued operations and maintaining the unilateral power to revise the budget, to set fees and hours of operations, and to terminate the contract itself. Because I do *1316not believe that either Congress or the Supreme Court would approve of such a narrow interpretation of the FLSA, I must dissent.