Brennan v. State of Iowa

• Decision Date: 26 February 1974
• Docket Number: No. 73-1500.,73-1500.
• Parties: Peter J. BRENNAN, Secretary of Labor, United States Department of Labor, Appellee, v. STATE OF IOWA, Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

494 F.2d 100 (1974)

Peter J. BRENNAN, Secretary of Labor, United States Department of Labor, Appellee, v. STATE OF IOWA, Appellant.

No. 73-1500.

United States Court of Appeals, Eighth Circuit.

Submitted December 12, 1973.

Decided February 26, 1974.

Lorna Lawhead Williams, Special Asst. Atty. Gen. of Iowa, Des Moines, Iowa, for appellant.

Jacob Karro, Atty., U. S. Dept. of Labor, Washington, D. C., for appellee.

Before GIBSON and ROSS, Circuit Judges, and TALBOT SMITH,^* Senior District Judge.

ROSS, Circuit Judge.

This action by the Secretary of Labor seeking enforcement of the Fair Labor Standards Act, 29 U.S.C. § 201 et seq. (FLSA), was filed in the district court for the District of Iowa against the State of Iowa. Through its agency, the Department of Social Services, the State of Iowa owns and operates several institutions wherein persons are employed at less than the minimum and overtime wages prescribed by 29 U.S.C. §§ 206 and 207. Upon stipulated facts the district court held that the State of Iowa was subject to the provisions of the Act. This appeal followed.

The undisputed facts show that each of the nine institutions is either a hospital, an institution primarily engaged in the care of the sick, the aged, mentally ill or defective who reside on the premises, or a school for mentally or physically handicapped or gifted children. Each of the institutions purchases or orders some of its goods and supplies directly from manufacturers, producers or suppliers located outside the state. Each institution has employees in the following categories regularly handling, selling, or otherwise working on, or with, merchandise and supplies received from out-of-state suppliers:

(1) professional, medical, psychiatric and nursing employees who, in the treatment of patients, administer medicines and drugs and use therapeutic equipment and other medical supplies and equipment, substantial amounts of which are manufactured or produced outside the state;

(2) nursing service employees, aides, attendants, and orderlies who, in providing patient care, handle cleaning supplies, medical supplies and equipment, bedding, linens, towels and hospital clothing, substantial amounts of which are manufactured or produced outside the state;

(3) food service and dietary service employees who prepare, serve and dispense food to patients, residents, employees and visitors, substantial amounts of which foods are grown, processed or produced outside the state;

(4) housekeeping, maintenance and custodial employees who, in the regular course of their duties, use cleaning supplies, equipment and appliances, substantial amounts of which are manufactured or produced outside the state;

(5) laundry employees who use and handle cleaning supplies, bedding, linens, towels and hospital clothing, substantial amounts of which are manufactured or produced outside the state;

(6) office and administrative employees who use office supplies and equipment, substantial amounts of which are manufactured or produced outside the state.

Section 6 and Section 7 of the Fair Labor Standards Act, 29 U.S.C. §§ 206 and 207, provide that every employer shall pay minimum and overtime wages to each of his employees who is engaged in commerce or in the production of goods for commerce or is employed in an enterprise engaged in commerce or in the production of goods for commerce. An "enterprise engaged in commerce or in the production of goods for commerce" is defined to be:

An enterprise which has employees engaged in commerce or in the production of goods for commerce, including employees handling, selling, or otherwise working on goods that have been moved in or produced for commerce by any person, and which—

* * * * * *

(4) is engaged in the operation of a hospital, an institution primarily engaged in the care of the sick, the aged, the mentally ill or defective who reside on the premises of such institution, a school for mentally or physically handicapped or gifted children, a preschool, elementary or secondary school, or an institution of higher education (regardless of whether or not such hospital, institution, or school is public or private or operated for profit or not for profit).

29 U.S.C. § 203(s).

The adoption of the "enterprise concept" in 1961 by Congress has been held to be clearly within the power of Congress under the Commerce Clause. Maryland v. Wirtz, 392 U.S. 183, 188-193, 88 S.Ct. 2017, 20 L.Ed.2d 1020 (1968). Similarly, the amendment modifying the definition of "employer" to remove the exemption of the states with respect to the employees of certain hospitals, institutions, and schools was upheld. For the federal government, when acting within a delegated power, may override countervailing state interests. Maryland v. Wirtz, supra, 392 U.S. at 195, 88 S.Ct. 2017. See also Sanitary District v. United States, 266 U.S. 405, 45 S.Ct. 176, 69 L.Ed. 352 (1925). Thus, if a state engages in economic activities that are validly regulated by the federal government when engaged in by private persons, the state too may be forced to conform its activities to federal regulation. Maryland v. Wirtz, supra, 392 U.S. at 197, 88 S.Ct. 2017. See also United States v. California, 297 U.S. 175, 56 S.Ct. 421, 80 L.Ed. 567 (1936). Yet a state may assert its sovereign immunity in suits brought by private individuals under 29 U.S.C. § 216(b) to enforce the Act. Employees of the Department of Public Health and Welfare of Missouri v. Department of Public Health and Welfare of Missouri, 411 U. S. 279, 285, 93 S.Ct. 1614, 36 L.Ed.2d 251 (1973) Employees v. Missouri Public Health Dept.. The vehicle to enforce a state's conformity to the Act is at issue in this case. Based upon reasons expressed hereafter, we find that the extension of FLSA coverage to state employees is not made totally meaningless by the availability of a sovereign immunity claim.

Section 216(c) and Section 217 give the Secretary of Labor the authority to bring suits for violations of the Act. Cf. Employees v. Missouri Public Health Dept., supra, 411 U.S. at 285-286, 93 S.Ct. 1614. Such suits by the Secretary of Labor in enforcing the FLSA, though brought in public interest, are suits by the United States. See Mitchell v. Robert DeMario Jewelry, 260 F.2d 929, 932 (5th Cir. 1958), rev'd on other grounds, 361 U.S. 288, 80 S.Ct. 332, 4 L.Ed.2d 323 (1960) (and cases cited therein). Suits by the United States against a state are not barred by the eleventh amendment. United States v. Mississippi, 380 U.S. 128, 140-141, 85 S.Ct. 808, 13 L.Ed.2d 717 (1965). Thus, this suit against the State of Iowa is not barred by a claim of sovereign immunity. The only remaining question here is whether the particular institutions are subject to the Act. This question must be answered in the affirmative if we can find that these institutions are enterprises engaged in commerce or in the production of goods for commerce, or, more simply put, if these institutions employ any employees who are engaged in commerce or in the production of goods for commerce. See 29 U.S.C. § 203(s).

Under both of the two criteria established by the Act, these institutions must be said to be enterprises within the purview of the Act. First, courts have repeatedly held on previous occasions that activities of the nature performed by some of the employees of the institutions are activities in interstate commerce. Specifically, the activities of employees in sending, preparing, and receiving purchase orders, shipment orders, invoices, bills, and checks;¹ in receiving direct deliveries of goods transported interstate and in handling, storing and moving such goods after their delivery but before disposition to the ultimate consumer;² in regularly transporting or accompanying patients or residents to points outside the state for treatment, diagnosis, and other purposes;³ and in placing interstate telephone calls as a part of a regular course of business⁴ must be held to be activities performed in interstate commerce. Due to the interstate nature of the employees' activities, each of the institutions is an enterprise engaged in commerce. 29 U.S.C. § 203(s).

Secondly, as defined by 29 U.S.C. § 203(s), an enterprise engaged in interstate commerce may be one where the employees simply handle, sell or otherwise work on goods that have moved in interstate commerce. According to the undisputed facts, many employees handle articles which have moved in interstate commerce.⁵ Those activities bring the particular institutions involved within the purview of the Act if the articles handled by the employees can be determined to be "goods" as defined by the Act. 29 U.S.C. § 203(i). In other words, if the articles are wares, products, commodities, merchandise, or articles or subjects of commerce of any character, or any part or ingredient thereof, that have not reached their delivery into the actual physical possession of the ultimate consumer thereof, then they are goods within the definition of the Act and the mere handling of those goods by some institution employee prior to their delivery to the ultimate consumer renders the institution an enterprise engaged in commerce. Many cases have held that the institution itself is not the ultimate consumer of the articles set forth in the margin above. See, e. g., Brennan v. Dillion, 483 F.2d 1334 (10th Cir. 1973); Wirtz v. Melos Construction Corp., 408 F.2d 626 (2nd Cir. 1969).⁶ The constitutionality of 29 U.S.C. § 203(s) was upheld by the Court in Maryland v. Wirtz, supra. Thus, we conclude that each of the institutions are enterprises engaged in commerce.

Finally, we review the appropriateness of the relief granted by the district court. Section 17 of the Act provides:

The district courts . . . shall have jurisdiction, for cause shown, to restrain violations of section 215 of this title, including in the case of violations of section 215(a) (2) of this title the restraint of any withholding of payment of minimum

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