Mitchell v. Birkett

• Citation: 286 F.2d 474
• Decision Date: 12 January 1961
• Docket Number: No. 16568.,16568.
• Parties: James P. MITCHELL, Secretary of Labor, etc., Appellant, v. M. L. BIRKETT et al., Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (8th Circuit)

286 F.2d 474 (1961)

James P. MITCHELL, Secretary of Labor, etc., Appellant, v. M. L. BIRKETT et al., Appellees.

No. 16568.

United States Court of Appeals Eighth Circuit.

January 12, 1961.

Beate Bloch, Atty., U. S. Dept. of Labor, Washington, D. C., for appellant; Bessie Margolin, Asst. Sol., and Harold C. Nystrom, Acting Sol., U. S. Dept. of Labor, Washington, D. C., and Earl Street, Regional Atty., U. S. Dept. of Labor, Dallas, Tex., on the brief.

Edgar E. Bethell, Fort Smith, Ark., for appellees; Bethell & Pearce, Fort Smith, Ark., on the brief.

Before WOODROUGH, VAN OOSTERHOUT and MATTHES, Circuit Judges.

VAN OOSTERHOUT, Circuit Judge.

This is an action by the Secretary of Labor to recover from the defendants minimum wages and overtime compensation alleged to be due five of defendants' employees under the provisions of Sections 6 and 7 of the Fair Labor Standards Act of 1938, as amended.¹

After a trial upon the merits to the court, final judgment was entered dismissing the complaint. The Secretary has taken this timely appeal from such judgment. Jurisdiction is conferred upon the district court by Section 16(c) of the Act and by 28 U.S.C.A. §§ 1337 and 1345. This court acquired jurisdiction under 28 U.S.C.A. § 1291.

This action is against M. L. Birkett and J. M. Birkett, individually and as a partnership, d/b/a The Photo Shop. The five employee claimants were employed by the defendants at the photo shop located in Fort Smith, Arkansas. The defendants also operated a photography concession under the same trade name at Camp Chaffee, Arkansas, an Army installation located nine miles east of Fort Smith.

Defendants conceded that the employee claimants were engaged in interstate commerce and in the production of goods for interstate commerce within the meaning of the Act, and that claimants were not paid the minimum wage and overtime compensation provided by the Act. Defendants denied claimants had worked the number of hours claimed.

Defendants as a defense to the action urged that their business operation economically and functionally constituted one establishment and that it was exempt from the coverage of the Act under the retail or service establishment exemptions contained in § 13(a) of the Act, which provides among other things that the provisions of §§ 6 and 7 of the Act shall not apply with respect to:

"(2) any employee employed by any retail or service establishment, more than 50 per centum of which establishment\'s annual dollar volume of sales of goods or services is made within the State in which the establishment is located. 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; * * *".

The district court sustained this defense. Its opinion, which incorporates findings of fact and conclusions of law, and fully sets out the facts and the court's view of the law, is reported at 183 F.Supp. 291.

The complaint, filed October 14, 1959, sought wage adjustments for the period from July, 1957, to July, 1959. Defendants' operation changed in 1959 and defendants have been in compliance for the period subsequent to July, 1959. The trial court sustained defendants' statute of limitations defense under 29 U.S.C.A. § 255(a) as to claims for periods prior to October 14, 1957 — two years prior to the filing of the complaint. No appeal has been taken from such determination. Thus, the period here involved is that from October 14, 1957, to July, 1959. The crucial issue presented by this appeal is whether defendants' photo shops at Fort Smith and at Camp Chaffee constitute one establishment as that term is used in the exemption section of the Act. Upon this issue, the court states:

"The plaintiff insists that an establishment, as that term is used in the Act, can mean only a distinct physical place of business and that each physically separated unit must stand on its individual record without regard to its economic and functional relationship to another unit. If this contention is correct, the Fort Chaffee concession sales could not be counted with the sales at the Fort Smith location in determining the applicability of the retail exemption. If the Fort Smith sales are analyzed alone, the defendants do not meet the statutory requirements of a retail establishment, and the court must find the issues in favor of the plaintiff." 183 F.Supp. 291, 296.

Thus, unless the defendants have met the burden which rests upon them of establishing that the shops at Fort Smith and Camp Chaffee constitute but one establishment within the meaning of § 13(a) (2) of the Act, we need not concern ourselves with other issues raised.

The facts on the establishment issue are not in dispute and are fully set out in the trial court's reported opinion. The trial court accepted defendants' contention that the two geographically separated units of defendants' business were functionally and economically one establishment. In reaching such conclusion, the court relied on the common ownership and purpose of the business, and the fact that the Fort Smith unit was set up to comply with an Army demand that twenty-four hour photo finishing service be furnished at the post concession. No space was available at the base for a photo finishing unit. It is, however, undisputed that the Fort Smith unit in addition to servicing the Camp Chaffee photo finishing, did similar work for Fort Smith customers and it likewise processed film on a wholesale basis for some fifty drug stores. The Fort Smith unit handled cameras and camera equipment, which items it was not permitted to handle at the base store, and during part of the period here involved performed pickup and delivery service for a dry cleaner for compensation.

Separate records were maintained for the two shops. Defendants contend that this was done primarily because of its obligation to pay the Army a commission on business done at the base.

The Supreme Court has had occasion to consider what constitutes an establishment in Phillips, Inc. v. Walling, 324 U.S. 490, 65 S.Ct. 807, 89 L.Ed. 1095, and Mitchell v. Bekins Van & Storage Co., 352 U.S. 1027, 77 S.Ct. 593, 1 L.Ed. 2d 589. In the Phillips case, the retail exemption was denied to central office and warehouse employees of a retail chain store system. The court, as a basis for holding that the exemption provisions of the Act are to be narrowly construed, states:

"The Fair Labor Standards Act was designed `to extend the frontiers of social progress\' by `insuring to all our able-bodied working men and women a fair day\'s pay for a fair day\'s work.\' Message of the President to Congress, May 24, 1934. Any exemption from such humanitarian and remedial legislation must therefore be narrowly construed, giving due regard to the plain meaning of statutory language and the intent of Congress. To extend an exemption to other than those plainly and unmistakably within its terms and spirit is to abuse the interpretative process and to frustrate the announced will of the people." 324 U.S. 493, 65 S.Ct. 808.²

The court thus speaks of the meaning of retail establishments:

"But if, as we believe, Congress used the word `establishment\' as it is normally used in business and in government — as meaning a distinct physical place of business — petitioner\'s enterprise is composed of 49 retail establishments and a single wholesale establishment." 324 U.S. 496, 65 S.Ct. 810.

At footnotes 6 and 7 the court supports its view that the word "establishment" as used in the Act was intended to have a narrow meaning.

It is true that the court went on to emphasize that the chain store system is a hybrid retail and wholesale enterprise and that while in the particular case the wholesale division supplies only its own stores, the duties of the wholesale employees economically, functionally and physically are like those of the employees of independent wholesalers.

The hybrid wholesale and retail situation in Phillips was seized upon by some courts as a basis for distinguishing situations where no wholesale function was involved. See Mitchell v. Bekins Van & Storage Co., 9 Cir., 231 F.2d 25, and Mitchell v. T. F. Taylor Fertilizer Works, 5 Cir., 233 F.2d 284, a case much relied upon by the defendants and the trial court.

The facts in the Bekins case are fully set out in the court of appeals opinion, which includes as an appendix the findings of the trial court. There five physically separated warehouses in the East Los Angeles area were operated as a unit with central control at one of the warehouses. The five warehouses served the East Los Angeles territory but the territory was not subdivided as to services to be...