Homemakers Home & Health Care Services, Inc. v. Carden

• Decision Date: 17 August 1976
• Docket Number: No. 74-1680,74-1680
• Court: U.S. Court of Appeals — Sixth Circuit
• Parties: 22 Wage & Hour Cas. (BN 1099, 78 Lab.Cas. P 33,392 HOMEMAKERS HOME AND HEALTH CARE SERVICES, INC., and Homemakers International Company, Plaintiffs-Appellants, v. Claibourne W. CARDEN, Area Director Employment Standards Administration U. S. Department of Labor, et al., Defendant-Appellee.

Page 98

538 F.2d 98

22 Wage & Hour Cas. (BN 1099, 78 Lab.Cas. P 33,392

HOMEMAKERS HOME AND HEALTH CARE SERVICES, INC., and Homemakers International Company, Plaintiffs-Appellants, v. Claibourne W. CARDEN, Area Director Employment Standards

Administration U. S. Department of Labor, et al.,

Defendant-Appellee.

No. 74-1680.

United States Court of Appeals, Sixth Circuit.

Argued Feb. 5, 1975.

Decided June 21, 1976.

Rehearing Denied Aug. 17, 1976.

James F. Neal, Aubrey B. Harwell, Jr., Neal & Harwell, Nashville, Tenn., David E. McGiffert, Theodore Garrett, Covington & Burling, Washington, D. C., for plaintiffs-appellants.

Ralph D. York, U. S. Dept. of Labor, Charles H. Anderson, U.S.Atty., Martha Johnson, Marvin Tincher, Regional Atty., U. S. Dept. of Labor, Nashville, Tenn., Donald S. Shire, Darryl Anderson, Deputy Associate Sol., U. S. Dept. of Labor, Washington, D. C., for defendant-appellee.

Before PECK and McCREE, Circuit Judges, and MILES ^*, District Judge.

MILES, District Judge.

This appeal raises novel issues of first impression under the so-called "retail exemption" to the minimum wage requirements of the Fair Labor Standards Act. Appellant Homemakers Home and Health Care Services, Inc., and its wholly-owned subsidiary, Homemakers International Co., operates a series of local offices which engage in the business of providing domestic and health care services on a temporary basis. They appeal a judgment by the District Court, Middle District, Tennessee that this enterprise is not a "retail or service establishment" exempt under Section 13(a)(2) of the Act, 29 U.S.C. § 213(a)(2). The status of approximately 120 of Homemakers' local offices is at issue. ¹

Commencing in 1971, Homemakers sought the opinion of the Administrator of the Wage and Hour Division of the Department of Labor regarding the applicability of the Section 13(a)(2) exemption to its operations. In a series of rather short letters, culminating in an opinion letter dated November 17, 1971, and reaffirmed by another letter dated August 20, 1972, ² the Administrator rejected Homemakers' contention that it was exempt under the Act finding that Homemakers' business lacked a "retail concept," and that its operations were not significantly different from those of an employment agency, an industry which the Administrator has consistently found to be without a "retail concept."

At that point, Homemakers voluntarily complied with the requirements of the Act and subsequently filed this declaratory judgment action in the District Court for the Middle District of Tennessee, seeking to test the Administrator's interpretation. Appellees answered and filed a counterclaim under Section 17 of the Act, 29 U.S.C. § 217 to recover alleged unpaid back wages and to permanently enjoin further claimed violations of the Act.

The parties below were, by agreement, able to considerably narrow the range of issues before the trial court, and this court. In a stipulation executed on February 1, 1974, both parties agreed to figures setting forth the annual sales of each of 67 of Homemakers' local offices, along with the percentage of that amount which was not for resale. The parties further stipulated to the fact that Homemakers and its local offices constitute an enterprise engaged in commerce within the meaning of the Act. Thus, as both parties concede, the only issue left before the District Court was whether Homemakers qualified as a "retail or service establishment" as defined in the Section 13(a)(2) exemption.

Following a non-jury trial, the District Judge issued Findings of Fact and Conclusions of Law, agreeing with the Administrator's interpretation, and holding that because Homemakers had failed to meet the tests included in the "retail or service establishment" definition, Section 13(a)(2) was inapplicable to its operations. ³ Homemakers appeals that decision and takes issue with two of the District Court's conclusions. First, appellants argue that the District Court finding that Homemakers' business lacked a "retail concept" was not supported by the evidence and was based on an unwarranted deferral to an unsupported agency decision. Secondly, they contend that the Court's holding that Homemakers had not proved that 75% of its sales were "recognized as retail" in the industry rested on an erroneous interpretation of the burden of proof required under this test.

At all times pertinent to this lawsuit, Section 13(a)(2) of the Act, 29 U.S.C. § 213(a)(2) provided as follows:

The provisions of sections 6 and 7 shall not apply with respect to

(2) 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 is not in an enterprise described in section 3(s) or such establishment has an annual dollar volume of sales which is less than $250,000 (exclusive of excise taxes at the retail level which are separately stated). A "retail or service establishment" shall mean 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 indus- try: . . . ⁴

This Court has had occasion recently to consider the analysis of the Section 13(a)(2) exemption in Brennan v. Southern Productions, Inc., 513 F.2d 740 (6th Cir. 1975). As summarized in that case, threshold questions under this section are:

The first step in determining whether the "retail or service establishment" exemption applies, is to ascertain whether the concept of retail selling of goods or services exists with respect to the establishment in question. The establishment must be part of a business or industry to which the "retail concept" applies. Idaho Sheet Metal Works, Inc. v. Wirtz, 383 U.S. 190, 202, 86 S.Ct. 737, 15 L.Ed.2d 694 (1966); 29 C.F.R. § 779.316.

The second step in ascertaining whether the retail or service establishment exemption applies, is reached only if it is first determined that the retail concept applies to the establishment's business. Idaho Sheet Metal Works, Inc. v. Wirtz, supra, 383 U.S. at 202, 86 S.Ct. 737. The employer claiming the exemption must prove that 75% of the establishment's annual dollar volume of sales "is recognized as retail sales or services in the particular industry." Sec. 13(a)(2), as amended. 29 U.S.C. § 213(a)(2). Southern Productions, supra 744-745. ⁵

The case also reaffirmed a number of standing principles governing the judicial review of administrative determinations under the Fair Labor Standards Act. First of all, 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." Southern Productions, Id.; Arnold v. Ben Kanowsky, Inc., 361 U.S. 388, 392, 80 S.Ct. 453, 456, 4 L.Ed.2d 393 (1960); Fletcher v. Grinnell Bros., 150 F.2d 337, 340 (6th Cir. 1945). Additionally, the employer has the burden of showing that it is within the purview of the exemption claimed by it. Southern Productions, Id.; Mitchell v. Kentucky Finance Co., 359 U.S. 290, 291, 79 S.Ct. 756, 3 L.Ed.2d 815 (1959). It is settled that the agency's interpretations and opinions are not binding on this Court. Rather, they are to be treated as "a body of experience and informed judgment to which courts and litigants may properly resort for guidance." Skidmore v. Swift & Co., 323 U.S. 134, 140, 65 S.Ct. 161, 164, 89 L.Ed. 124 (1944) Southern Productions, Id.

As there is no dispute over Homemakers' structure and method of operations, we turn to the applicability of the § 13(a)(2) exemption, and within the framework set forth above, we undertake the analysis outlined in Southern Productions.

I. RETAIL CONCEPT

The starting point for ascertaining whether a retail concept applies to appellant's endeavors is well stated by Judge Boreman in Wirtz v. Modern Trashmoval Inc., 323 F.2d 451 (4th Cir. 1963), cert. den. 377 U.S. 925, 84 S.Ct. 1222, 12 L.Ed.2d 216 (1963).

"In determining whether or not a business activity is a 'retail or service establishment' within the meaning of the section 13(a)(2) exemption, we think the most satisfactory approach is to examine the facts of record as to the nature and conduct of its business in the light of general criteria developed under the Act since its enactment in 1938." Id. at 465

Under this formula, before considering the retail concept itself, we turn first to a more complete description of Homemakers' operations.

Homemakers was organized in 1965 in order to provide domestic help and health care employees such as housekeepers, registered nurses, licensed practical nurses, orderlies, companions, etc. on a temporary basis, both to private individuals and to medical facilities for staff augmentation. The work for a given customer can last from a few hours to several weeks. A number of these employees are live-ins, remaining with their charges throughout the course of their assignment. Homemakers' employees are bonded and insured and receive training and supervision from the local office. The services rendered are performed pursuant to work orders drawn up by the local office and the work is monitored by supervisory personnel. The local office handles both collections from customers and the payments of its employees.

The second step of this process, that of ascertaining the "criteria developed under the Act," poses a problem of considerably greater magnitude. Our dilemma is compounded by the fact that Homemakers and like services did not even exist at the time Section 13(a)(2) was enacted.

The form of this Section current during this case is a result of amendments to the Act enacted in 1949 in response to Congressional dissatisfaction with the so-called "business use" test which had been developed by the Administrator...