Hodgson v. Servomation-Ajax Co.
| Decision Date | 05 March 1971 |
| Docket Number | No. EC 7019.,EC 7019. |
| Citation | 323 F. Supp. 1047 |
| Parties | James D. HODGSON, Secretary of Labor, United States Department of Labor (Substituted as Plaintiff for George P. Shultz, resigned), Plaintiff, v. SERVOMATION-AJAX CO., Inc., a Corporation, and Servomation Corporation, a Corporation, Defendants. |
| Court | U.S. District Court — Northern District of Mississippi |
James E. Price, of Stovall & Price, Corinth, Miss., for plaintiff.
George D. Palmer, U. S. Dept. of Labor, Birmingham, Ala., for defendants.
This action brought pursuant to Section 17 of the Fair Labor Standards Act of 1938 (29 U.S.C.A. § 201 et seq.), hereinafter referred to as the Act, was tried to the court at Aberdeen, Mississippi on February 18, 1971, and has been submitted on the record, pre-trial order, evidence introduced and stipulations made at the trial as shown by the reporter's notes, and pre-trial memorandums of law submitted by the parties. This memorandum of decision contains the court's findings of fact and conclusions of law required by Rule 52(a) Fed.R.Civ.P.
Servomation-Ajax Co., Inc., a Mississippi corporation, is a wholly owned subsidiary of Servomation Corporation, a New York corporation.1 Servomation, dispensing through vending machines, has been engaged in the business of selling sandwiches, entrees, candies, beverages and other items of a similar nature2 in the Corinth, Mississippi area since March 1968.
Servomation Corporation does not have employees, as such, in the Corinth plant, but reports concerning Servomation's operation at Corinth are made monthly to a central office of Servomation Corporation at Nashville, Tennessee, where final accounting figures are entered, bills paid, etc. Servomation Corporation has an executive who is charged with the duty of overseeing the operation of the Corinth plant. Approximately ten per cent of the food and beverages dispensed by Servomation are delivered to vending machines in the States of Alabama and Tennessee. The balance is delivered to vending machines situated in Mississippi.
There are but two issues presented to the court in this action.
One issue is whether Servomation Corporation is a proper defendant. The control exercised over the operation of Servomation by Servomation Corporation is, in the opinion of the court, sufficient to charge Servomation Corporation with the responsibilities of an employer under the Act. While Servomation is a separate corporate entity, it is under the complete domination and ultimate control of Servomation Corporation. The corporate affairs of Servomation are under the control of Servomation Corporation's executive officer, who has the last voice over all matters of importance concerning Servomation's activities. The general books of Servomation are kept by Servomation Corporation, and Servomation Corporation handles all receipts and disbursements of Servomation. The term "Employer" is defined by the Act to include "any person acting directly or indirectly in the interest of an employer in relation to an employee".3 In Shultz v. Chalk-Fitzgerald Construction Co., 309 F.Supp. 1255, 1257 (D.C.Mass.1970), the court said:
The domination and control which Servomation Corporation exercises over the affairs of Servomation are sufficient to render Servomation Corporation liable herein to the extent, if any, as Servomation may be liable.
The second issue involves the kitchen employees of Servomation in its place of business at 101 East Fifth Street in Corinth. Prior to the 1966 amendments to the Act certain retail establishments were exempt from coverage under the Act. Before the adoption of the amendments Section 13(a) (20) (29 U.S.C.A. § 213(a) (20)), provided:
Defendants have accepted the fact that the kitchen employees above mentioned are presently covered by the Act and defendants are presently complying with the minimum wage and overtime provisions of the Act. There is no current problem in this regard. The controversy arises out of the contention by defendants that the kitchen employees are within that class of employees who were exempt from the coverage of the Act by virtue of the above mentioned exception, but who were brought within the purview of Section 6 of the Act (29 U.S.C.A. § 206) by the 1966 amendments. The 1966 amendments provide for a gradual increase in the minimum rate of pay for those coming under the coverage of the Act for the first time because of the amendments.
The principal question for the court's decision resolves itself into this: Is defendants' place of business at 101 East Fifth Street in Corinth a "retail establishment" within the meaning of the exemption aforesaid?
The relevant facts are without substantial dispute. The premises at 101 East Fifth Street consist of a one story brick building and parking facilities. The building houses an office where the records of the company are kept, a storage area in which foods and beverages purchased as items already prepared are stored, a repair shop in which vending machines are repaired, and a kitchen in which sandwiches, entrees and similar items are prepared and packaged.
We are not concerned with areas in the building other than the kitchen, except such areas as are material to the determination of the establishment issue.
Servomation employs a local office-manager and bookkeeper. These employees perform most of their work in the office and storage area. The bookkeeper checks the supplies into and out of the storage area, and keeps and maintains the records of the company. The office-manager assists in checking supplies into and out of the storage area, and after receiving the supplies moves them into bins in the storage area assigned to the several truck delivery employees.
The sole mechanic works in the repair shop, maintaining and repairing vending machines which are brought in for repair. He also checks and repairs machines in the field.
The kitchen employees receive supplies which are stored either in refrigerated areas or in the open, depending upon the nature of the merchandise. The employees process the supplies or merchandise into sandwiches, entrees and other packaged food.
The public does not have access to Servomation's place of business. The food and beverages are turned over to truck drivers who deliver them to the several industrial plants where Servomation's vending machines are located. Servomation arranges with management at each industrial plant to locate vending machines in the plant. It is the custom for management to set aside a place in the plant where Servomation can place the vending machines. Servomation installs tables, chairs and other restaurant equipment in the lunch area. The employees of the plant come to this area and purchase food and beverages through the vending machines. They consume the food and beverages in the place and with the facilities provided by Servomation. It is customary, though such is not the case in every instance, for Servomation to employ a hostess to look after the vending machine area of the plant. The hostess receives packages of food and beverages which are inserted by her in the machines. She makes change for customers and keeps the lunch area clean.
The building at 101 East Fifth Street is not adjacent to any place where food and beverages are sold through vending machines. Employees in the kitchen or at the building, however, may buy food and beverages at retail prices for personal consumption on the premises. Otherwise, no member of the public is served there.
Defendants contend that the building at 101 East Fifth Street is properly classified as an adjunct to and a part of a single retail establishment engaged in the business of operating vending machines at numerous industrial plants in the area. Thus, defendants contend that the place of business at the aforesaid location is a "retail establishment" within the meaning of the Act.
Servomation began business at 101 East Fifth Street in Corinth during March 1968. In April, 1968 plaintiff's representatives advised defendants of plaintiff's position that the place of business at the address aforesaid did not qualify as a "retail establishment" and that defendants were not meeting the minimum wage and overtime requirements of the Act. Again in October, 1969 plaintiff's representatives made an inspection of defendants' place of business and again advised them of plaintiff's position in the matter.
Throughout the period until February 1, 1971, defendants substantially complied with the lower standards of the Act provided by the 1966 amendments, but did not comply with the higher standards ($1.60 an hour and time and one-half after 40 hours in each work week) which are required if plaintiff's position is correct.
An Opinion letter of the Wage-Hour Administrator, issued December 18, 1963 (Opinion Letter No. 221), states the position of the...
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Stahl v. Delicor of Puget Sound, Inc.
...cites Hodgson v. Servomation-Ajax Company8 for the proposition that vending machine companies cannot qualify as retail establishments. The Servomation court held that employees who prepared food in a kitchen where no sales were made were not employees of a retail establishment just because ......