Brennan v. Great American Discount and Credit Co., Inc., No. 72-2177.

• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)
• Writing for the Court: GEWIN, SIMPSON and RONEY, Circuit
• Citation: 477 F.2d 292
• Parties: Peter J. BRENNAN, Secretary of Labor, United States Department of Labor, Plaintiff-Appellant, v. GREAT AMERICAN DISCOUNT AND CREDIT COMPANY, INC., Defendant-Appellee.
• Docket Number: No. 72-2177.
• Decision Date: 09 April 1973

477 F.2d 292 (1973)

Peter J. BRENNAN, Secretary of Labor, United States Department of Labor, Plaintiff-Appellant,
v.
GREAT AMERICAN DISCOUNT AND CREDIT COMPANY, INC., Defendant-Appellee.

No. 72-2177.

United States Court of Appeals, Fifth Circuit.

April 9, 1973.

Richard F. Schubert, Sol. of Labor, Carin Ann Clauss, Donald S. Shire, U. S. Dept. of Labor, Washington, D. C., Beverley R. Worrell, Regional Sol., U. S. Dept. of Labor, Atlanta, Ga., for plaintiff-appellant.

Frank W. Riggs, John W. Davis, Montgomery, Ala., for defendant-appellee.

Before GEWIN, SIMPSON and RONEY, Circuit Judges.

RONEY, Circuit Judge:

The Government appeals from the District Court's determination that defendant's

477 F.2d 293

employment agencies are entitled to the "retail or service establishment" exemption in Section 13(a)(2) of the Fair Labor Standards Act. 29 U.S.C.A. § 213(a)(2). We reverse

Not only is this case one of first impression in this Court, but we are told that no other Court of Appeals has addressed the application of the retail or service establishment exemption to employment agencies.

Our analysis of the problem causes us to conclude that Congress did not intend to exempt employment agencies from the operation of the Act. Defendant Darrell Walker, president of the Great American Discount and Credit Company, Inc., is engaged in the business of operating employment agencies under various names and styles in Alabama and Tennessee. These agencies locate, on a local basis and without the assistance of other agencies, suitable employment for clients, who generally pay the placement fee. The service consists solely of introducing the job applicant and the prospective employer. The agencies are independent establishments and, although Walker communicates frequently with all of them, only rarely do they trade information.

Having agreed to dismiss the action against the Great American Discount and Credit Company, Inc., the Secretary of Labor proceeded against walker alone. The District Court found that Walker's interests in the various employment agencies constituted sufficiently unified operation and common control to amount to a single enterprise engaged in commerce under the statutory definition:

"The related activities performed (either through unified operation or common control) by any person or persons for a common business purpose, and includes all such activities whether performed in one or more establishments or by one or more corporate or other organizational units . . . ."

29 U.S.C.A. § 203(r).

The Court concluded, however, that Walker's businesses merited the "retail or service establishment" exemption in Section 13(a)(2), which exempts from the minimum wages and maximum hours requirements of the Act

"any employee employed by any retail or service establishment . . . if more than 50 per centum of such establishment\'s annual dollar volume of sales of goods or services is made within the State in which the establishment is located, and such establishment . . . has an annual dollar volume of sales which is less than $250,000 . . . ."

A "retail or service establishment" is defined in that provision as

"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 . . . ."

Although the dollar volume of sales of the single enterprise consisting of all of the employment agencies owned by Walker either as sole proprietor or as a partner exceeded $250,000, none of the individual agencies ever exceeded $250,000 annual gross volume of sales. To obtain the exemption, therefore, Walker need show only that the individual agencies were retail and service establishments within the meaning of the Act.

Walker's claim rests on two arguments: (1) that although an early administrative ruling held that employment agencies were not exempt, a 1949 amendment to Section 13(a)(2) broadened the scope of the exemption to include businesses such as his; and (2) that his businesses meet the statutory requirements because there is industry recognition that its sales are "retail sales or services."

The employer has the burden of proof in establishing facts requisite to an exemption, Idaho Sheet Metal Works, Inc. v. Wirtz, 383 U.S. 190, 86 S.Ct. 737, 15 L.Ed.2d 694, reh. denied, 383 U.S. 963, 86 S.Ct. 1219, 16 L.Ed.2d

477 F.2d 294

305 (1966); Schultz v. Louisiana Trailer Sales, Inc., 428 F.2d 61 (5th Cir.), cert. denied, 400 U.S. 902, 91 S.Ct. 139, 27 L.Ed.2d 139 (1971), and the exemption provisions are to be narrowly construed against those seeking to assert them, Arnold v. Ben Kanowsky, Inc., 361 U.S. 388, 80 S.Ct. 453, 4 L.Ed.2d 393 (1960)

From the beginning, the Fair Labor Standards Act of 1938 provided that retail establishments were exempt from the Act. The Department of Labor's Wage and Hour Administrator issued in 1941 an interpretative bulletin which characterized "retail establishments" as those businesses selling goods or services to private individuals for personal or family consumption or to businesses or state agencies if at prices and in quantities appropriate to personal or family consumption. The Administrator's general characterization of "retail establishments" was considered by the Supreme Court in 1946. In Roland Co. v. Walling, 326 U.S. 657, 66 S.Ct. 413, 90 L.Ed. 383 (1946), the Court held 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." It was suggested that no sale of any article for business or profit-making use, as opposed to personal consumption, could qualify as a retail sale. See Roland Co., supra, at 673-677, 66 S.Ct. 413; see also Martino v. Michigan Window Cleaning Co., 327 U.S. 173, 66 S.Ct. 379, 90 L.Ed. 603 (1946); Boutell v. Walling, 327 U.S. 463, 66 S.Ct. 631, 90 L.Ed. 786 (1946).

In 1949 Congress abrogated this "business use" test by amending the relevant sections of the Act. But Section 16(c) of the amendment expressly provided that any existing "order, regulation, or interpretation of the...