Idaho Sheet Metal Works, Inc v. Wirtz Wirtz v. Steepleton General Tire Company

• Citation: 383 U.S. 190,86 S.Ct. 737,15 L.Ed.2d 694
• Decision Date: 24 February 1966
• Docket Number: Nos. 30,31,s. 30
• Parties: IDAHO SHEET METAL WORKS, INC., Petitioner, v. W. Willard WIRTZ, Secretary of Labor. W. Willard WIRTZ, Secretary of Labor, Petitioner, v. STEEPLETON GENERAL TIRE COMPANY, Inc., et al
• Court: United States Supreme Court

383 U.S. 190

86 S.Ct. 737

15 L.Ed.2d 694

IDAHO SHEET METAL WORKS, INC., Petitioner,

v W. Willard WIRTZ, Secretary of Labor.

W. Willard WIRTZ, Secretary of Labor, Petitioner,

v. STEEPLETON GENERAL TIRE COMPANY, Inc., et al.

Nos. 30, 31.

Argued Dec. 8, 1965.

Decided Feb. 24, 1966.

Rehearing Denied March 28, 1966.

See 383 U.S. 963, 86 S.Ct. 1219.

[Syllabus from pages 190-191 intentionally omitted] No. 30:

Eli A. Weston, Boise, Idaho, for petitioner.

Charles Donahue, Washington, D.C., for respondent.

No. 31:

Bessie Margolin, Washington, D.C., for petitioner.

Lucius E. Burch, Jr., Memphis, Tenn., for respondents.

Mr. Justice HARLAN delivered the opinion of the Court.

The common question presented by these two cases is the meaning of the phrase 'retail or service establishment' as that language is used in the exemptive provisions of the federal wage and hour statute. We first set forth the statute and describe the two cases before us, then examine the history and content of the exempting clause, and finally apply the resulting analysis to the facts of each case.

I.

The Fair Labor Standards Act of 1938 enacted a comprehensive scheme providing for minimum wages and overtime pay for workers 'engaged in' or 'in the production of goods for' interstate and foreign commerce.¹ Among other exemptions, Congress by § 13(a)(2) of the Act has excluded from the statute's wage and hour protections those employees working for certain 'retail or service' establishments.² To qualify for this exemption in its present form, an establishment must meet three tests: first, it must make more than 50% of its annual dollar volume of sales of goods or services within the State; ³ second, it must meet one of four tests designated '(i)—(iv),' chiefly designed to prevent most very large employers from enjoying the exemption;⁴ third, it must be a 'retail or service establishment.' Regarding this third requirement—which is the focus of this decision—s 13(a)(2) states that '(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 industry.'

Of the cases before us, the first one, No. 30, stems from two consolidated actions brought by the Secretary of Labor against Idaho Sheet Metal Works, Inc. (Idaho Sheet). By one action the Secretary sought to enjoin future disregard of the Act's overtime provisions, and by the other he sought to collect on behalf of one employee unpaid overtime compensation for a period during the year 1960. See §§ 15—17, 52 Stat. 1068—1069, as amended, 29 U.S.C. §§ 215—217 (1964 ed.). The ensuing litigation established that Idaho Sheet operates a plant in Burley, Idaho, where it employs about 12 workers to fabricate, install, and maintain sheet metal products. Many articles are sold to individuals, farmers, and local merchants, the plant has display racks to show its wares, and about 60% of sales in number are said to be to 'the general public' as opposed to industrial customers. About 83% of the gross income, however, is derived from metal work done on equipment used by five potato processing companies which dehydrate and freeze the potatoes for interstate shipment.

For its defense, Idaho Sheet denied its workers were engaged in or producing goods for interstate commerce. It also claimed to be an exempt retail or service establishment, adducing proof that over 75% of its dollar volume of sales was not for resale and that its officials and salesmen who sell to it regarded the business as retail. The District Court held that Idaho Sheet was outside the interstate commerce coverage of the Act and was in any case exempt. The Court of Appeals for the Ninth Circuit reversed on both points and held in favor of the Secretary. 9 Cir., 335 F.2d 952. We granted certiorari limited to the question whether Idaho Sheet was a retail or service establishment within the meaning of the Act. 380 U.S. 905, 85 S.Ct. 894, 13 L.Ed.2d 793.

In the other case before us, No. 31, the Secretary of Labor sued the Steepleton General Tire Company (Steepleton) and its president to require compliance with the minimum wage, overtime pay, and record-keeping provisions of the Act. Steepleton, which is located in Memphis, Tennessee, and employs about 47 workers, is a franchised tire dealer engaged in the sale, recapping, and repair of tires. Some of Steepleton's income derives from dealings with private customers but more than half the gross income comes from sales and repairs of tires furnished to businesses operating heavy industrial or construction vehicles or operating fleets of trucks; apparently a sizable though unspecified portion of these commercial customers operated their equipment in interstate commerce.

The District Court determined that Steepleton came within the interstate commerce coverage of the Act, and that issue is no longer in the case. Alleging itself to be exempt under § 13(a)(2), Steepleton showed that 75% or more of its sales were not for resale and that the industry's predominant and longstanding use of the word retail applied that term to all tire sales not for resale, despite the commercial character of the tires and the established pattern of quantity discounts. The only explanation offered for this use was that it conformed to many state sales tax statutes. The Secretary showed that the industry sometimes used the word retail in other senses that excluded commercial sales and that commercial customers of Steepleton did not regard their purchases as retail transactions. The District Court held Steepleton to be entitled to the exemption. The Court of Appeals for the Sixth Circuit affirmed the District Court in all respects, 330 F.2d 804, and we granted certiorari at the behest of the Secretary to consider whether Steepleton qualified as a retail or service establishment. 380 U.S. 904, 85 S.Ct. 894, 13 L.Ed.2d 794.

The approach of the Sixth Circuit, which took industry usage as controlling, and that of the Ninth Circuit, which rejected it as the sole test, represent irreconcilable interpretations of the critical statutory language. While support can be mustered for both views, we believe the Ninth Circuit is correct and on this point follow our earlier decision in Mitchell v. Kentucky Finance Co., 359 U.S. 290, 79 S.Ct. 756, 3 L.Ed.2d 815. After rejecting the industry's usage as controlling, we face the further difficult question of what criteria do determine when business transactions are retail under the Act; to this question it is still less easy to return a clear-cut answer, but our analysis of the matter leads us to conclude that neither Idaho Sheet nor Steepleton qualifies as a retail or service establishment.

II.

To construe the present language of the exemption demands a knowledge of its origins. Section 13(a)(2), as it appeared in the 1938 enactment, used the present phrase 'retail or service establishment' to delimit the exemption but did not further define the concept.⁵ The Department of Labor's Wage and Hour Administrator initially made his interpretation of the retail exemption known through an Interpretative Bulletin and through various official statements.⁶ To summarize very generally, the Administrator viewed a retail establishment as one selling goods or services to private individuals for personal or family consumption; sales of these same goods or services to businesses or state agencies remained retail if sold at the normal price charged private consumers or in quantities a private consumer would buy. See Interp.Bull.No.6, 14, in 1942 WH Manual, p. 330. However, there were deviations from this consumer-goods standard in favor of employers, notable instances being the exemption of farm implement dealers and linen supply firms supplying commercial customers. See Statements of the Administrator, in 1944—1945 WH Manual, pp. 469—470.

In 1946 this Court decided Roland Electrical Co. v. Walling, 326 U.S. 657, 66 S.Ct. 413, 90 L.Ed. 383, holding 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. The opinion used considerable language suggesting that no sale of any article for business or profit-making use as opposed to personal consumption could qualify as a retail sale, a position which supported the result but went far beyond a necessary holding. See 326 U.S., at 673—677, 66 S.Ct. at 420—422. This case, and several others in this vein,⁷ prompted the Administrator to report to Congress that certain hitherto exempt classes of business were endangered—notably farm equipment dealers—and to recommend amending legislation. See 1948 Wage and Hour Division, Annual Report, pp. 120—121.

The Administrator proposed, so far as immediately relevant, to define a retail establishment as one deriving 75% of its income from retail sales and then to define as retail sales those made to private individuals for personal or family consumption, sales of the same items to any other customer if not for resale and if similar in type and quantity, and sales to farmers of goods of the type and quantity used on the ordinary farm. When Congress convened in 1949, a number of bills were introduced to amend the Act in various respects. The bill reported out by the House committee and the substitute measure first debated by the House adopted the Administrator's basic proposal, but a further substitute backed by an opposing coalition and introduced as an amendment during the debates finally prevailed and was sent to the Senate.⁸ This bill as passed contained the definition of exempt retail and service establishments that became law in 1949 and which remains the law today.⁹ The Senate during the debate of its own committee-reported bill, which did not amend the retail exemption, amended the Senate bill to...