Adkins v. Mid-American Growers, Inc.

• Decision Date: 10 March 1999
• Docket Number: No. 98-1842,MID-AMERICAN,98-1842
• Parties: 137 Lab.Cas. P 33,801, 5 Wage & Hour Cas.2d (BNA) 129 Harold ADKINS, et al., Plaintiffs-Appellees, v.GROWERS, INC., Defendant-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 355

167 F.3d 355

137 Lab.Cas. P 33,801, 5 Wage & Hour Cas.2d

(BNA) 129

Harold ADKINS, et al., Plaintiffs-Appellees, v. MID-AMERICAN GROWERS, INC., Defendant-Appellant.

No. 98-1842.

United States Court of Appeals, Seventh Circuit.

Argued Nov. 9, 1998.

Decided Jan. 29, 1999.

Rehearing Denied March 10, 1999.

Donald R. Brewer, Dundee, IL; John W. Billhorn (argued), Chicago, IL, for Harold Adkins.

John W. Billhorn (argued), Chicago, IL, for James Burger and Patricia Ann Watson.

Carl E. Johnson (argued), Anthony B. Byergo, Seyfarth, Shaw, Fairweather & Geraldson, Chicago, IL; Douglas A. Gift, Herbolsheimer, Lannon, Henson, Duncan & Reagan, LaSalle, IL, for Mid-American Growers, Inc.

Before POSNER, Chief Judge, and CUDAHY and COFFEY, Circuit Judges.

POSNER, Chief Judge.

This suit by 122 hourly workers at Mid-American Growers, a large Illinois producer of flowers and flowering plants, charges Mid-American with violating the overtime provisions of the Fair Labor Standards Act, 29 U.S.C. §§ 201 et seq. The district court conducted a trial limited to the applicability of section 213(b)(12) of the FLSA--the agricultural exemption. He found the exemption inapplicable, 965 F.Supp. 1076 (N.D.Ill.1997), and later granted the plaintiffs summary judgment on the remaining issues and ordered the defendant to pay a total of $115,000 in overtime pay and liquidated damages.

The core of Mid-American's operation is a 1 million square foot greenhouse in which the company grows and sells more than a million plants every year. "Agriculture" within the meaning of the Fair Labor Standards Act "includes farming in all its branches and among other things includes ... the production, cultivation, growing, and harvesting of any ... horticultural commodities," 29 U.S.C. § 203(f), and the district judge found that nearly 98 percent of Mid-American's sales, consisting of plants grown "from scratch" (that is, from seeds, bulbs, cuttings, or starter plants), are uncontroversially within the exemption. The controversy centers on the other 2 percent of Mid-American's sales, which are of mature plants purchased from other growers. Most of these are foliage plants that Mid-American purchases from growers in the South, mainly Florida. Because Mid-American's sales area has a colder climate than the areas from which these plants come, the plants' prospects for flourishing in their new environment are enhanced if they undergo a process called "acclimatization." The process involves subjecting the plants in Mid-American's greenhouse, prior to sale, to reduced levels of light, temperature, humidity, and fertilizer in order to foster a smooth transition to the harsher environment in which the plants are to live after they are sold. The process takes two to six weeks but some of the plants are sold sooner--some almost immediately--either because they look particularly robust or because customers want them regardless. The acclimatization process clearly is agricultural; it is a form of "cultivating ... the growing crop." 29 C.F.R. § 780.205(c).

In addition to the southern foliage plants, Mid-American buys some mature plants from other growers in order to cover its obligations, either contractual or customary, to its customers in the event that its own production is inadequate because of blight or other disasters. Sometimes, however, Mid-American has an excess of customer orders over available production not because of a production shortfall but because it has accepted more orders than even its normal production capacity can fill, and then it buys the plants it needs in order to fill these orders from other growers and resells the plants without doing any agricultural work on them.

When Mid-American buys plants and then resells them without doing significant agricultural work it is operating as a wholesaler rather than as a grower, and wholesalers of agricultural commodities are not exempt from the Act. Wirtz v. Jackson & Perkins Co., 312 F.2d 48, 51 (2d Cir.1963); Mitchell v. Huntsville Wholesale Nurseries, Inc., 267 F.2d 286, 290-91 (5th Cir.1959). But the agricultural exemption does cover nonagricultural activities that are incidental to the core activities that the statute exempts. For it defines "agriculture" to include not only farming per se (and remember that "farming" includes horticulture) but also "any practices ... performed by a farmer or on a farm as an incident to or in conjunction with such farming operations." 29 U.S.C. § 203(f); see Holly Farms Corp. v. NLRB, 517 U.S. 392, 398, 116 S.Ct. 1396, 134 L.Ed.2d 593 (1996); Bayside Enterprises v. NLRB, 429 U.S. 298, 300-01, 97 S.Ct. 576, 50 L.Ed.2d 494 (1977); Farmer's Reservoir & Irrigation Co. v. McComb, 337 U.S. 755, 762-70, 69 S.Ct. 1274, 93 L.Ed. 1672 (1949). The cases call such activities "secondary agriculture." There are two uncontroversial examples in the present case. Work connected with the sale of flower pots (also planters and other containers) is exempt even when the pots are sold without any plants or flowers in them. And work connected with those cover purchases that Mid-American makes because of production shortfalls, though not those it makes merely because of an excess of orders over normal production, is also exempt. Wirtz v. Jackson & Perkins Co., supra, 312 F.2d at 51; Walling v. Rocklin, 132 F.2d 3, 7 (8th Cir.1942).

That leaves the southern foliage plants that are sold without being acclimatized and the cover purchases not warranted by production shortfalls. These two categories of nonexempt "wholesaling" account for some unknown but presumably small percentage of the 2 percent of Mid-American's sales that is not conceded to be exempt. The percentage of a percentage is unknown because Mid-American does not keep records of which sales fall into these categories. The district judge held that since some of Mid-American's sales were nonexempt, all its workers' overtime was subject to the FLSA. He awarded double damages because he thought that Mid-American had no reasonable basis for thinking exempt the sales that he ruled nonexempt. 29 U.S.C. §§ 216(b), 260; Shea v. Galaxie Lumber & Construction Co., 152 F.3d 729, 733 (7th Cir.1998); Avitia v. Metropolitan Club of Chicago, Inc., 49 F.3d 1219, 1223 (7th Cir.1995).

The underlying reason why the agricultural exemption includes some nonagricultural activity is that it is not always feasible to separate agricultural from nonagricultural labor. The problem is illustrated by flowers that are sold in pots. If a worker works on such a product more than 40 hours a week, is the overtime agricultural or nonagricultural? It is both, but since the nonagricultural component is minor and inseparable, and since the FLSA does not permit overtime pay to be prorated for a worker who does both exempt and nonexempt work, 29 C.F.R. § 780.11; Skipper v. Superior Dairies, Inc., 512 F.2d 409, 411 (5th Cir.1975), the employer is given a break and the work classified as entirely agricultural. To deny him the break would burden the efficient integration of closely related activities, especially in situations in which the amount of nonexempt activity is too slight to warrant the expense of a separate work force. See, e.g., Damutz v. Pinchbeck, 158 F.2d 882 (2d Cir.1946) (per curiam). But where the nonexempt activity can be feasibly separated from the exempt, the separation is essential to prevent agricultural enterprises from obtaining an artificial competitive advantage over enterprises that do not enjoy an exemption from the Fair Labor Standards Act.

The interaction of these principles is illustrated by Maneja v. Waialua Agricultural Co., 349 U.S. 254, 75 S.Ct. 719, 99 L.Ed. 1040 (1955), in which railroad and repair shop, as well as sugar cane, workers employed by a producer of sugar cane were held to be included in the exemption but the workers at a separate processing plant were held to be excluded. The Court emphasized both the "necessity of integrating ... [carriage and repair] with Waialua's main operation," id. at 263, 75 S.Ct. 719; cf. Farmers Irrigation Co. v. McComb, supra, 337 U.S. at 760-62, 69 S.Ct. 1274; Reich v. Tiller Helicopter Services, Inc., 8 F.3d 1018, 1029 (5th Cir.1993), and the arbitrary competitive advantage that the enterprise would enjoy over competing sugar processors if the exemption extended to the processing plant. Maneja v. Waialua Agricultural Co., supra, 349 U.S. at 269, 75 S.Ct. 719; see also 29 C.F.R. § 780.146.

The record in the present case unfortunately does not reveal whether it is feasible to separate out from the work done on the exempt activities the work done on nonexempt activities. It is true that all the southern foliage plants are in one part of Mid-American's greenhouse. But it is only a subset of these that are not exempt as primary agriculture--those plants that are resold before they have been acclimatized plus plants bought for purposes of cover not necessitated by a production shortfall. It may be feasible to segregate these two categories of plant or to assign particular workers to work full time on them. But then again it may not be. Work on the two categories of plant constitutes only a tiny fraction--perhaps no more than one-half of 1 percent--of Mid-American's labor. Mid-American's work force fluctuates over the course of the year between about 90 and about 150 workers. One-half of 1 percent of 90 or even 150 workers is less than one worker, so that if one worker were assigned full time to the two arguably nonexempt activities he would be underemployed. If the worker were also assigned exempt work, the employer would lose the exemption for this...