Rau v. Darling's Drug Store, Inc., Civ. A. No. 74-184.

• Decision Date: 31 January 1975
• Docket Number: Civ. A. No. 74-184.
• Citation: 388 F. Supp. 877
• Parties: Anna Mae RAU, Plaintiff, v. DARLING'S DRUG STORE, INC., Defendant.
• Court: U.S. District Court — Eastern District of Pennsylvania

388 F. Supp. 877

Anna Mae RAU, Plaintiff, v. DARLING'S DRUG STORE, INC., Defendant.

Civ. A. No. 74-184.

United States District Court, W. D. Pennsylvania.

January 31, 1975.

Henry E. Rae, Jr., Brandt, McManus, Brandt & Malone, Pittsburgh, Pa., for plaintiff.

Murray S. Love, Sikov & Love, Pittsburgh, Pa., for defendant.

OPINION AND ORDER

SNYDER, District Judge.

This is a proceeding brought under the provisions of Section 7 of the Fair Labor Standards Act, 29 U.S.C. § 207, in which the Plaintiff seeks to recover overtime compensation for the years 1972 and 1973. The Defendant contends that the Plaintiff was employed in an "executive capacity" and is thus exempt from those provisions. On December 12, 1974, this Court heard the matter in a Non-Jury Trial.

FINDINGS OF FACT

1. The Plaintiff, Anna Mae Rau (Rau), is forty-one years of age and has been employed continuously at Darling's Drug Store, Inc. (Darling's) since 1953.

2. Darling's is a corporation whose stock was owned solely by Nathan Darling until the time of his death in 1973.

3. Darling operated a neighborhood type retail drug store, located in the Uptown Section of the City of Pittsburgh, Allegheny County, Pennsylvania, on a seven days a week, fifty-two weeks a year basis. In 1972 the store hours were 7:30 A.M. to 8:00 P.M., but that closing time was first modified to 7:00 P.M. and subsequently changed to 6:00 P.M.

4. In the years in question, Darling's did business through five departments and in the following amounts:

                                                Fiscal Year Ending         Fiscal Year Ending
                                                     3-31-72                    3-31-73      
                         PRESCRIPTIONS          $175,426.88 (48%)          $160,167.47 (46%)
                         DRUGS & SUNDRIES         44,838.32 (12%)            52,058.65 (15%)
                         CANDY & TOBACCO          61,034.50 (17%)            65,335.96 (19%)
                         COSMETICS                13,353.97 ( 4%)             9,275.82 ( 3%)
                         FOUNTAIN                 69,608.09 (19%)            59,121.91 (17%)
                

5. Although at the time she was hired Rau's duties were essentially those of a sales clerk, as time went on she was given more and more functions to perform by Nathan Darling.

6. The contract of employment was intended to compensate the Plaintiff on a straight time basis for all hours she was called upon to work in a workweek (regardless of how many), and Rau clearly understood and agreed to these terms.

7. During the years in question, Rau had nothing to do with the Prescription Department which was managed by Harold Rosenberg, a registered pharmacist, who supervised apprentice pharmacists who were hired by Nathan Darling. All wages and working hours were also fixed by Nathan Darling.

8. In 1972 and 1973, Rau helped out in both the Candy and Tobacco Department, where two persons were employed, and in the Fountain Department, where three persons were employed, if, for any reason, one of these employees was not available. She did supervise these Departments.

9. Rau was the sole sales clerk for the Drug & Sundries and the Cosmetics Departments, and handled the stocking of shelves and the marking of merchandise. Rau did all of the sales work in these Departments except for an occasional helping hand from Mary Darling, the wife of the owner. Her work in these Departments occupied fifty to eighty percent of Rau's working hours.

10. Rau's other duties included:

Unpacking new merchandise; marking price tags on new merchandise; collection of employee's time slips and reporting time records by telephone to the accountant's office; opening the store each morning at 6:30 A.M.; closing the store each night and leaving the store at 8:30 P.M. or later; helping out in other Departments when they were busy; making out bills for the monthly accounts receivable; and decorating the store windows.

11. By 1972 Rau was generally in charge of the "front of the store", that is, everything other than the Prescription Department. Even so, more than fifty percent of her time was taken up with sales clerk work.

12. Nathan Darling determined who should be hired and fired. These decisions were frequently made upon Rau's recommendations, except as to the employees of the Prescription Department.

13. Nathan Darling fixed the salaries and wages for all employees, fixed the sales price of all goods sold, and was consulted on all decisions that were to be made with respect to store policy.

14. During 1972 Rau's base wage was $120.00 per week, plus a $20.00 cash payment which, although not included in her wage statement, was given to her by Nathan Darling on a weekly basis and was part of her regular base wage, making her weekly wage $140.00.

15. During 1973 Rau's base wage was $120.00 per week, plus a $30.00 cash payment which, although not included in her wage statement, was given to her by Nathan Darling on a weekly basis and was part of her regular base wage, making her weekly wage $150.00.

16. Rau averaged twelve hours per day on a seven day per workweek basis for the one hundred and four weeks comprising the 1972-1973 period.

17. Rau was not paid any overtime wages for any work in excess of forty hours per week during 1972 and 1973. Other benefits provided by her employer, such as food and merchandise discounts, were in the nature of gifts and not based upon the number of hours worked. These were not in the nature of compensation such as would be included in the determination of the "regular rate", nor were they premiums to be credited toward overtime compensation.

18. The hourly rate of pay or the "regular rate" paid to Rau during the fiscal year 1972 was $1.67, calculated at twelve hours per day for seven days per week or eighty-four hours per week, on the weekly rate of $140.00.

19. The hourly rate of pay or the "regular rate" paid to Rau during the fiscal year 1973 was $1.79, calculated at twelve hours per day for seven days per week or eighty-four hours per week, on the weekly rate of $150.00.

20. All business checks were signed by either Nathan or Mary Darling, and no other employee had authority to sign checks.

21. Payrolls were prepared by P. A. Love & Company, the business accountant, from information furnished by Rau, and all accounts payable were computed and paid by the accountant.

22. Rau was not employed in an executive or administrative capacity which would be exempt from the overtime provisions of the Fair Labor Standards Act.

DISCUSSION

The Fair Labor Standards Act, 29 U. S.C. § 207, sets forth:

"207. Maximum hours

"(a)(1) Except as otherwise provided in this section, no employer shall employ any of his employees who in any workweek is engaged in commerce or in the production of goods for commerce, or is employed in an enterprise engaged in commerce or in the production of goods for commerce, for a workweek longer than forty hours unless such employee receives compensation for his employment in excess of the hours above specified at a rate not less than one and one-half times the regular rate at which he is employed."

The term "regular rate" is defined by the Act to "include all remuneration for employment paid to, or on behalf of, the employee" (Section 207(e)), but does not include sums paid for gifts, or for occasional periods when no work is performed due to vacation, holiday, illness or other similar causes. There are various other exclusions which are not here applicable.

It is further provided (Sec. 213(a)) that overtime pay at time and one-half does not apply with respect to:

"(1) any employee employed in a bona fide executive, administrative, or professional capacity . . . except that an employee of a retail or service establishment shall not be excluded from the definition of employee employed in a bona fide executive or administrative capacity because of the number of hours in his work week which he devotes to activities not directly or closely related to the performance of executive or administrative activities, if less than 40 per centum of his hours worked in the work week are devoted to such activities . . ." (Emphasis added)

"(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 203(s) of this title or such establishment has an annual dollar volume of sales which is less than $250,000 . . . 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; . . ."

In this case the parties agree that Rau worked in excess of forty hours per week, fifty-two weeks per year, and in a business which is not otherwise exempt, for which she would have to be paid overtime for hours in excess of forty hours at the rate of time and one-half, unless she occupied an "executive or administrative" position.

In resolving this issue, we must first apply the well known precept that "exemptions are to be narrowly construed against the employers seeking to assert them and their application limited to those establishments plainly and unmistakably within their terms and spirit." (Emphasis added) Arnold v. Kanowsky, 361 U.S. 388, 392, 80 S.Ct. 453, 4 L.Ed.2d 393 (1960); Brennan v. Bill Kirk's Volkswagen, 497 F.2d 892 (4th Cir. 1974); Hodgson v. Elk Garden Corporation, 482 F.2d 529 (4th Cir. 1973); Brennan v. Parnham, 366 F.Supp. 1014 (W.D.Pa.1973).

Plaintiff here contends that the exemption from overtime under the term "bona fide executive" or "administrative capacity" while not defined in the Act, is limited by the regulations promulgated by the Secretary of Labor.¹

29 C.F.R. § 541.1 establishes six specific criteria, all of which must be met before an employee can...