Hodgson v. Crotty Brothers Dallas, Inc.
| Decision Date | 19 October 1971 |
| Docket Number | No. 28616.,28616. |
| Citation | 450 F.2d 1268 |
| Parties | James D. HODGSON, Secretary of Labor, United States Department of Labor, Plaintiff-Appellant, v. CROTTY BROTHERS DALLAS, INC., et al., Defendants-Appellees. |
| Court | U.S. Court of Appeals — Fifth Circuit |
L. H. Silberman, Sol., U. S. Dept. of Labor, Washington, D. C., M. J. Parmenter, Regional Atty., U. S. Dept. of Labor, Dallas, Tex., Bessie Margolin, Associate Sol., Truett E. Bean, Carin Ann Clauss, Attys., U. S. Dept. of Labor, Washington, D. C., Seagal V. Wheatley, U. S. Atty., San Antonio, Tex., Ann Belanger, Atty., Dept. of Justice, Washington, D. C., Leon M. Kestenbaum, Atty., U. S. Dept. of Labor, Washington, D. C., for plaintiff-appellant.
Warren Whitham, Harry I. Freedman, Dallas, Tex., for defendants-appellees.
Alexander E. Wilson, Jr., Alexander E. Wilson III, Wilson, Wilcox & Wilson, Atlanta, Ga., amicus curiae for National Restaurant Ass'n.
Before COLEMAN, INGRAHAM and WILKEY*, Circuit Judges.
Rehearing and Rehearing En Banc Denied October 19, 1971.
This appeal is taken by the Secretary of Labor from a judgment of the District Court that the Crotty Bros. Dallas (Crotty) food service operation at St. Stephen's School is exempt from the overtime and minimum wage provisions of the Fair Labor Standards Act1 because it is a "retail establishment" within the meaning of § 13(a) (2) (1961) and § 13(a) (2) (1966) of the Act. Finding that the result reached by the District Court was correct, we affirm.
Since 1955 appellee Crotty has, pursuant to written contract, operated the dining facilities of St. Stephen's Episcopal School near Austin, Texas. These facilities are located in a separate building on the school premises and comprise a dining room, a kitchen for the preparation of food, and an office which is occupied by the Crotty manager.
The school itself is a combined boarding and day preparatory school owned and operated by the Diocese of Texas of the Episcopal Church, and has an enrollment of 223 male and female students, 170 of whom board on the premises. Tuition for the boarding students includes room and board, and tuition for the day students includes one meal a day, six days a week. These tuition charges, however, are insufficient to cover the entire cost of operating the school and the deficit is made up either by gifts from interested third parties or by the school's trustees.
With few exceptions, the students while on campus are required to report to the dining hall at mealtimes.2 They are assigned specific tables and attendance is checked by members of the faculty. Save at breakfast, which is served cafeteria style, one student from each table is appointed to bring food from the kitchen and to serve the others. The meals are prepared and served to these student "waiters" by Crotty employees, hired and subject to discharge by Crotty Dallas.
All food and supplies necessary to the operation of the food service are purchased by Crotty and are delivered to its possession and control at the kitchen, and all menus of meals to be served are prepared by the Crotty manager. Crotty's eleven employees are also responsible for maintenance of cleanliness in the feeding facilities, washing of the dishes, and the setting of the tables for lunch and dinner. According to the underlying agreement, Crotty must hold St. Stephen's harmless for various tort claims arising out of the operation of the dining facilities, and must cover its employees with workmen's compensation and liability insurance, as well as obtain all necessary state and federal licenses for its operations.
Crotty pays no rent for the dining hall or its facilities, and St. Stephen's furnishes all equipment and utilities necessary for efficient operation of the food service. The school also bears the expense of replacing lost silverware, broken china, and glassware. St. Stephen's retains the right to approve the operating policy of Crotty, its menus, and its hours of service, and also has the right to have discontinued the assignment to St. Stephen's of any Crotty employee who is or becomes "obnoxious or unsatisfactory" to the school or its agents.
Crotty does not collect money or vouchers directly from the students, faculty or authorized guests it serves. Instead, it submits to St. Stephen's a monthly statement showing its operating costs, including payroll, food, and supplies purchased, and receives from the school the amount of its costs plus, at the time of trial, $750.00 per month.
Claiming that this operation was covered by the Fair Labor Standards Act, the Secretary of Labor brought suit in the District Court to enjoin Crotty from violating its minimum wage, overtime, and record-keeping requirements, and to restrain the continued withholding of unpaid wages allegedly due the Crotty employees for periods worked since 31 January 1966.3
Crotty stipulated that its activities at the school, a small part of its nationwide operations, were activities in an enterprise within the meaning of § 3(s) of the Act. It also admitted noncompliance with the Act's minimum wage and overtime provisions, but claimed that the employees at the St. Stephen's operation were exempt from these provisions by virtue of § 13(a) (2), which exempts employees of relatively small retail service establishments, even though within an enterprise, from the minimum wage and overtime provisions of the Act. In addition, it claimed that prior to 1 February 1967 (the effective date of the latest amendment to the Act) its employees were exempt from both its minimum wage and overtime provisions under § 13(a) (2) (ii), exempting employees of enterprises constituting restaurants, and § 13(a) (20), exempting employees of retail service establishments engaged primarily in food service operations such as catering, box lunch, or curb or counter service to either public or restricted clienteles. And it claimed that subsequent to 1 February 1967 its operation at the school was at least exempt from the Act's minimum wage requirement by virtue of §§ 13(b) (8) and 13(b) (18), essentially the equivalents of former §§ 13(a) (2) (ii) and 13(a) (20), respectively, though having been narrowed to an exemption from only the overtime provisions of the Act.
Rejecting the Secretary's various contentions to the contrary, the District Court found the Crotty employees at St. Stephen's exempt from coverage under § 13(a) (2) of the Act, and, since this was considered dispositive of the entire controversy, made no findings as to the applicability of the remaining provisions. This appeal followed.
Prior to being amended for the first time in 1949, the Fair Labor Standards Act covered through § 3(j), inter alia, activities of individual employees "necessary" to the production of goods for commerce.4 This led the United States District Court for the Northern District of Ohio in McComb v. Factory Stores of Cleveland5 to find that the employees of Factory Stores working at its food service operations in the factories and offices of Republic Steel were covered by the Act just as were the Republic employees themselves.
The Factory Stores opinion notes several factors that tied the food service operation in with the overall operation of Republic, including the close contractual connection between Republic and Factory Stores, which provided that Republic would furnish the land on which the feeding units were placed in operation and would bear the cost of the original installation as well as the supplying of the utilities; the concern of the Republic management over the services and food available in the facilities; and conditions in the factories that made it impossible for Republic employees to eat elsewhere—along with the benefits to Republic of maintaining such conditions, e. g., dovetailing of lunch periods with work schedules, shortening of lunch periods, and immediate availability of employees during their shifts regardless of outside weather conditions.
This close connection between the food service operation and Republic's own activities, and Republic's reliance thereupon led the court to the conclusion that "the fueling of the human beings who operate the machines" was as essential to the production of Republic's goods "as the fueling of the boilers which run those machines"; hence, the employees of the food service were covered by the Act.
The court only nodded at the retail service exemption provided in § 13(a) (2),6 citing as dispositive the Supreme Court case of Roland Electrical Co. v. Walling which bluntly stated, "to the extent that sales or services are necessary for the production of goods for interstate commerce they generally are by that hypothesis not sales or services to an ultimate consumer for his personal use and, accordingly, are neither `retail' sales nor services of a comparable character, within the meaning of § 13(a) (2)."7
One year later, in 1949, Congress reacted to Factory Stores and Roland by striking from § 3(j) the word "necessary" and substituting language requiring the employee to be engaged in a "closely related" occupation "directly essential" to the production of goods before coverage would attach, and amended § 13(a) (2) to make it more specific and to contain its own definition of what constitutes a retail or service establishment.8
With respect to Factory Stores, Congress made its intent clear in the legislative history, which said:
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