Mitchell v. TF Taylor Fertilizer Works, 15802.

• Decision Date: 08 May 1956
• Docket Number: No. 15802.,15802.
• Citation: 233 F.2d 284
• Parties: James P. MITCHELL, Secretary of Labor, United States Department of Labor, Appellant, v. T. F. TAYLOR FERTILIZER WORKS, Inc., Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

233 F.2d 284 (1956)

James P. MITCHELL, Secretary of Labor, United States Department of Labor, Appellant, v. T. F. TAYLOR FERTILIZER WORKS, Inc., Appellee.

No. 15802.

United States Court of Appeals Fifth Circuit.

May 8, 1956.

Beverley R. Worrell, Regional Atty., U. S. D. of L., Birmingham, Ala., Bessie Margolin, Asst. Solicitor, U. S. D. of L., Washington, D. C., Stuart Rothman, Solicitor, Sylvia S. Ellison, Eugene R. Jackson, Attorneys, United States Department of Labor, Washington, D. C., for appellant.

Waldo DeLoache, Moultrie, Ga., Moore, Gibson, DeLoache & Gardner, Moultrie, Ga., of counsel, for appellee.

Milton A. Carlton, Moultrie, Ga., Price, Spivey & Carlton, Swainsboro, Ga., of counsel, for Millen Fertilizer Co., amici curiæ.

Before HUTCHESON, Chief Judge, and TUTTLE and CAMERON, Circuit Judges.

TUTTLE, Circuit Judge.

The sole issue on this appeal is whether the appellee's fertilizer dry mixing plant and office are exempted from the Fair Labor Standards Act as a retail establishment by Section 13 of the Act, 29 U.S.C.A. § 213. At pre-trial conference, the company conceded that it had not complied with the overtime provisions of the statute, § 207, and that if it was not entitled to an exemption under § 213(a) (4), it would have no defense to the Secretary's suit for injunctive relief; the Secretary conceded that all the percentage requirements for exemption under § 213(a) (4) were met by the defendant. The trial issues were therefore limited to whether the company's plant and office constitute one "establishment," within the meaning of the Act, whether it "is recognized as a retail establishment in the particular industry", and whether its sales are "recognized as retail sales or services in the particular industry." 29 U.S.C.A. § 213(a) (2), (a) (4). The trial court, sitting without a jury, resolved all three issues in the defendant's favor. On appeal, the Secretary specifies error in each of these findings of fact.

The facts relative to the appellee's business are not disputed. The company is one of the enterprises of T. F. Taylor, and rents one of his three tobacco warehouses for use as a fertilizer dry mixing plant throughout the year except during the tobacco season, which lasts for about six weeks in July and August. The factory is known in the fertilizer industry as a "dry mixing plant," as opposed to a "complete plant," because the operation is limited to mixing previously manufactured chemicals. The term "dry mixing" is a holdover from the time when all the ingredients were dry, and is still used although some chemicals, such as a certain nitrogen solution, are now shipped in liquid form. A "complete plant", on the other hand, may make sulphuric acid, and perhaps other ingredients as well.

The appellee's dry mixing plant and tobacco warehouse is situated in the industrial section of Moultrie, Georgia, but about half the orders are taken in an office five blocks away, in the business district. In the office, which also serves Taylor's real estate and retail oil businesses, all records are maintained, all orders are turned in, and all invoices and dray bills are written up. The deliveries are made exclusively from the plant, however. All sales are made direct to farmers for farm use, there being no intermediary dealers or agents, except traveling salesmen employed on a salary basis.

The Secretary contends first that the plant and office are separate establishments, so that because, presumably, all sales are made initially either on the road or in the office, and are approved in the office, the plant cannot qualify as a retail establishment because it makes no sales. The argument relies both on the legislative history of the 1949 amendments to § 213 and on court decisions before and after the amendments to show that an "establishment" is not a business; and this much being demonstrated, the Secretary concludes that each physically separate unit of a business is an establishment. However, the suggestion that the right to an exemption depends upon such factors as whether part of the business is separated by a partition, or is conducted in an adjoining building, or in a building across the street or five blocks away, does not recommend itself as a rational distinction; furthermore, it does not appear to have been the intent of Congress. The House Managers, in their statement on the proposed bill, had the following to say of the exemption as applied to physically separate warehouses:

"Since, however, the exemption does apply to any employee employed `by\' an exempt retail or service establishment, it is applicable to employees of an exempt retail or service establishment working in a warehouse operated by and servicing such establishment exclusively, whether or not the warehouse operation is conducted in the same building as the selling or servicing activities" U.S.Code Congressional Service 1949, p. 2265.

Indeed, as the Secretary suggests at one point in his brief, the distinction turns on functional as well as geographical separation. The functional difference was deemed an important factor in Phillips, Inc., v. Walling, 324 U.S. 490, 65 S.Ct. 807, 89 L.Ed. 1095, where the company's warehouse and central office servicing its chain of 49 retail grocery stores was held to be a separate establishment. The Court pointed out that chain store organizations are "of a hybrid retail-wholesale nature" and in the wholesaling aspects of their operation should not gain "a competitive advantage in labor costs over independent wholesalers." 324 U.S. 490, 495, 498, 65 S.Ct. 807, 809.

The Secretary asserts that the same functional difference is present here (manufacturing and sales), but, so interpreted, a functional difference would exist in any business which maintains an office separate from its place of warehousing or processing. To the contrary, the functional difference noted in the Phillips case was that existent in the various aspects of a "hybrid" business, not in the ordinary distinction which exists in many businesses between the clerical staff and the warehouse or plant employees.

This was recognized in Walling v. Goldblatt Bros., 7 Cir., 152 F.2d 475 and Bogash v. Baltimore Cigarette Service, 4 Cir., 193 F.2d 291. In Goldblatt, the fact that the warehouse in question was across the alley from the retail store it serviced was held to be without significance, and in Bogash, a company which maintained cigarette vending machines in various places of business was held exempt in all of its operations, even though its warehouse was separate from its central office. The Fourth Circuit stated in the latter case that while a chain store system may be separated into its wholesale and retail aspects, "this procedure may not be carried so far by the courts as to divide a genuinely retail business into separate parts." 193 F.2d 291, 294.

Thus, the first question in a case such as this is whether a business is retail, in whole or in part, and if it is of a hybrid character, which of its aspects are retail and which are not. If parts of it are not, it would not matter for the purposes of coverage that they are conducted behind a partition or even in the same room, provided that they are truly separable from the retail branch of the enterprise. On the other hand, if the business is not of a hybrid character, then it is of no consequence that the office exists...