Chao v. Double Jj Resort Ranch

• Decision Date: 09 July 2004
• Docket Number: No. 02-2068.,02-2068.
• Citation: 375 F.3d 393
• Parties: Elaine L. CHAO, Secretary of Labor, Plaintiff-Appellant, v. DOUBLE JJ RESORT RANCH, et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

375 F.3d 393

Elaine L. CHAO, Secretary of Labor, Plaintiff-Appellant, v. DOUBLE JJ RESORT RANCH, et al., Defendants-Appellees.

No. 02-2068.

United States Court of Appeals, Sixth Circuit.

Argued: March 10, 2004.

Decided and Filed: July 9, 2004.

Paul Frieden (briefed), Mary J. Rieser (argued and briefed), U.S. Department of Labor Office of the Solicitor, Washington, D.C., Leonard A. Grossman, U.S. Department of Labor Office of the Solicitor Chicago, IL, for Plaintiffs-Appellants.

Donald A. Van Suilichem (argued and briefed), Van Suilichem & Associates, Bloomfield Hills, MI, for Defendant-Appellee.

Before: MARTIN and CLAY, Circuit Judges; MILLS, District Judge.^*

OPINION

BOYCE F. MARTIN, JR., Circuit Judge.

Secretary of Labor, Elaine Chao, asks us to overturn the district court's grant of summary judgment to Double JJ Resort Ranch, Inc., et al. She also asks us to reverse the district court's denial of her motion for summary judgment. She argues that the district court erred when it found Double JJ to be exempt from the minimum-wage and overtime-pay guarantees of the Fair Labor Standards Act, 29 U.S.C. §§ 206(a), 207(a). We agree in part and REVERSE.

I.

Defendants are a group of corporations doing business as Double JJ Resort. Double JJ is a large western-themed resort near Rothbury, Michigan. The resort includes a variety of lodging and dining facilities, a conference center (for up to 250 people), bars, a general store, a gift shop, a gas station, a barbershop, campsites, swimming pools, three lakes, and facilities related to horseback riding. While at Double JJ, resort guests can go canoeing, attend camp fires, shoot archery, play shuffleboard, climb walls (for fun and in designated areas), fish, go on hay rides, pet farm animals, or ride water slides, among other things. There is also a golf course on site, but both parties agree that it is a separate establishment and is not part of this suit. Guests may purchase a "package deal," or they may purchase their food, lodging, and recreational activities separately. The great bulk of Double JJ's revenue comes from the sale of food, drink, and lodging, not from the sale of recreational activities.

Double JJ employs from 300 to 350 employees during the peak season and about 50 employees in the off-season. Double JJ earns the bulk of its revenue during the peak season, serving up to 300 overnight guests each night and an additional 100 daytime visitors. Double JJ pays both hourly wages and salaries, depending on the employee, but no employee is paid overtime, and some employees are paid less than the minimum wage.

Secretary Chao brought this enforcement action under section 17 of the Fair Labor Standards Act of 1938, 29 U.S.C. § 201 et seq., in the United States District Court for the Western District of Michigan. She sought to enjoin Double JJ from violating the minimum-wage, overtime, and record-keeping requirements of the Act.

The Secretary alleged that the since April 4, 1998, and in violation of 29 U.S.C. § 215, Double JJ: failed to pay covered employees at least minimum wage as required by 29 U.S.C. § 206(a); failed to pay covered employees at a rate not less than one and one-half times their regular rate of pay for all hours worked in a workweek in excess of the first forty, as required by 29 U.S.C. § 207(a)(1); and failed to keep records of employee wages, hours, and conditions of employment as required by 29 U.S.C. § 211(c). Double JJ responded, claiming that it had not violated the Act, because it was exempt from the requirements as an "amusement or recreational facility."

Section 13(a)(3) of the Act provides that the minimum-wage requirements, 29 U.S.C. § 206, and the overtime-pay requirements, 29 U.S.C. § 207, are not applicable with respect to:

any employee employed by an establishment which is an amusement or recreational establishment, organized camp, or religious or non-profit educational center, if (A) it does not operate for more than seven months in any calendar year, or (B) during the preceding calendar year, its average receipts for any six months of such year were not more than 33 1/3 per centum of its average receipts for the other six months of such year, except that the exemption from sections 206 and 207 of this title provided by this paragraph does not apply with any respect to any employee of a private entity engaged in providing services or facilities (other than, in the case of the exemption from section 206 of this title, a private entity engaged in providing services and facilities directly related to skiing) in a national park or a national forest, or on land in the National Wildlife Refuge System, under a contract with the Secretary of the Interior or the Secretary of the Agriculture[.]

Both parties filed for partial summary judgment. The district court granted the defendants' motion and dismissed the case. The court explained:

[w]hile a majority of the Double JJ's revenue is from food and lodging, only a few guests visit the Double JJ either for food or lodging. Guests' principal reason for visiting the Double JJ is to participate in recreational activities, and food and lodging are secondary to the principle purpose of enjoying recreational activities. Hence, the Court finds that on the specific facts of this case, Defendant's principal activity is recreational.

Secretary Chao filed this appeal.

II.

"Whether employees are within an exemption from the provisions of the [Fair Labor Standards] Act is primarily a question of fact. The District Court's finding of fact cannot be set aside unless they are clearly erroneous." Brennan v. Southern Prods., Inc., 513 F.2d 740, 744 (6th Cir. 1975). However, where, as here, the facts are not in dispute, but the parties contest the legal application of those facts, we review the district court's grant of summary judgment de novo. Paul Revere Life Ins. Co. v. Brock, 28 F.3d 551, 553 (6th Cir.1994); see also United States v. Brown, 915 F.2d 219, 223 (6th Cir.1990) (holding a district court's statutory interpretations will be reviewed de novo).

It is well settled law in our Circuit that an employer who claims to be exempt from the requirements of the Fair Labor Standards Act has the burden of proving it qualifies under the terms of a specific exemption. Homemakers Home & Health Care Servs., Inc. v. Carden, 538 F.2d 98, 101 (6th Cir.1976). "[The Act] was designed to eliminate labor conditions detrimental to the maintenance of the minimum standard of living necessary for the health, efficiency, and general well-being of workers." Brock v. Louvers and Dampers, Inc., 817 F.2d 1255, 1256 (6th Cir.1987). "[W]ithin the terms of the coverage fashioned by Congress, the Act has been construed liberally to apply to the furthest reaches consistent with congressional discretion." Mitchell v. Lublin, McGaughy & Assocs., 358 U.S. 207, 211, 79 S.Ct. 260, 3 L.Ed.2d 243 (1959). Thus, "exemptions from the Act are to be narrowly construed against the party asserting them and their application limited to those establishments plainly and unmistakably within their terms and spirit." Homemakers, 538 F.2d at 101 (internal citations omitted).

III.

Secretary Chao makes one argument on appeal. Conceding that Double JJ meets the "seasonal" requirement of the section 213(a)(3) test, the Secretary argues that the district court erred in its determination that Double JJ was the type of establishment that Congress intended to exempt. We agree.

This case centers on the legal definition of the phrase "amusement and recreational establishment" as it is used in 29 U.S.C. § 213(a)(3). "When interpreting a statute, this Court must begin with its plain language, and may resort to a review of congressional intent or legislative history only when the language of the statute is not clear." Herman v. Fabri-Centers of Am., Inc., 308 F.3d 580, 585 (6th Cir.2002).

Double JJ argues that we need go no further than the statute's plain language to affirm the district court. In essence, Double JJ claims that there is a common sense definition of "recreational establishment" — which apparently is being in the "fun business" — and that it clearly qualifies. While we applaud Double JJ's appeal to common sense, its argument followed to its logical end would allow the exemption to become the rule. See e.g., Dole v. Mr. W. Fireworks, Inc., 889 F.2d 543, 546 (5th Cir.1989) ("permitting every seaside merchant to claim the exemption would result in the exemption swallowing the rule"). Arguably, any ice-cream stand or restaurant could qualify under Double JJ's proposed interpretation. A boat seller could claim that it was derivatively a "recreational establishment," given that its sales enable the fun of sailing. It would certainly not be a laughable claim under Double JJ's definition that the boat seller is in the "recreation business." Most businesses sell something — a thing, a service, a right to occupy — and any number of arguments could be marshaled to connect the remote sale to something fun. Thus, unlike Double JJ, we do not believe we can end our analysis with a plain-language interpretation of section 213(a). "Recreational establishment" is an ambiguous phrase. Congress clearly meant for there to be a limitation to the exemption, and the words used in the statute do not plainly convey where that boundary lies.

The Secretary turns our attention to both the legislative history of the Act and the opinions of the Labor Department's Wage and Hour Administrator to support her argument that Double JJ is not exempt. "Because [the Department of Labor's] Wage and Hour Administrator is the primary federal authority entrusted with determining the [Act's] scope, these interpretations while not controlling upon the courts by reason of their authority, do constitute a body of experience and informed judgment to which the courts and litigants may properly resort to for guidance." Reich v. Miss Paula's Day Care Ctr., Inc., 37 F.3d 1191,...