Reich v. Miss Paula's Day Care Center, Inc.

• Decision Date: 19 October 1994
• Docket Number: No. 93-3706,93-3706
• Parties: , 129 Lab.Cas. P 33,157, 2 Wage & Hour Cas.2d (BNA) 609 Robert B. REICH, Secretary of Labor, United States Department of Labor, Plaintiff-Appellee, v. MISS PAULA'S DAY CARE CENTER, INC., and Janice Hartman, Defendants-Appellants.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 1191

37 F.3d 1191

63 USLW 2268, 129 Lab.Cas. P 33,157,

2 Wage & Hour Cas.2d (BNA) 609

Robert B. REICH, Secretary of Labor, United States Department of Labor, Plaintiff-Appellee, v. MISS PAULA'S DAY CARE CENTER, INC., and Janice Hartman Defendants-Appellants.

No. 93-3706.

United States Court of Appeals Sixth Circuit.

Submitted June 23, 1994.

Decided Oct. 19, 1994.

William J. Stone, Lois R. Zuckerman (briefed), U.S. Dept. of Labor, Office of the Sol., Washington, DC, Benjamin T. Chinni, Office of the Sol., U.S. Dept. of Labor, Cleveland, OH, for plaintiff-appellee.

Ronald R. Calhoun (briefed), Gallipolis, OH, for defendants-appellants.

Before: KEITH, BOGGS, and BATCHELDER, Circuit Judges.

BOGGS, Circuit Judge.

This case raises a question of statutory construction: when does a facility that cares for children younger than compulsory school age become a "preschool"? Under 29 U.S.C. Sec. 203(s)(1)(B), "preschools" must comply with the same minimum-wage and maximum-hour employment standards that apply to other enterprises subject to the federal Fair Labor Standards Act ("FLSA"). Appellants, who describe their business as a "child day care center," contend that they are not governed by FLSA because their day care operation is not a "preschool." The Secretary of Labor disagrees. The parties consented to disposition of the case by a magistrate judge, 28 U.S.C. Sec. 636(c), and he found for the Secretary. We hold that Appellants are governed by the FLSA.

I

Miss Paula's Day Care Center, Inc. ("Miss Paula"), jointly owned by co-defendant Janice Hartman and her daughter, Paula Back, provides quality custodial care for very young children in the Appalachian region of southeastern Ohio. It has 12 employees and has grown to care for more than 60 children. The young charges range in age from "infants and toddlers" to those between ages three and six. Many of the children's parents are low-income, working mothers or college students who are hard-pressed to pay for child care. Unlike pure babysitting services, Miss Paula provides its charges with daily activities targeted towards their intellectual stimulation and enrichment. Miss Paula has been able to remain affordable for its working-class clientele by paying its staff below the federal minimum wage. The proprietor herself earned only $13,000 in 1991 from her 50% share of the business.

Miss Paula has operated since 1985 as a state-licensed day care center, certified by the Ohio Department of Human Services under Ohio Rev.Code Ann. Secs. 5104.01-.03. Miss Paula has never sought licensing under the separate statutory provisions that define the different institutional category of "preschool." Ohio Rev.Code Ann. Secs. 3301.52 et seq., 3313.646.

The Secretary of Labor ("the Secretary") regards Miss Paula as a "preschool," at least in the statutory sense of the word. Thus, Miss Paula has learned "overnight" that it must pay minimum wages. While this sudden development may enable Miss Paula to hire future staff members from a wider pool of applicants, it will also strain its tight budget. ¹ Indeed, as part of the Secretary's findings, Miss Paula has been assessed $18,147.89 in back wages and interest that it must pay employees who had been receiving salaries below minimum wage. Appellants contend that it is wrong to characterize Miss Paula as a "preschool" and that such an assessment may ultimately drive the day care center out of business. However, although public policy issues are present, this appeal primarily concerns statutory construction.

Miss Paula tries to show that: (1) "child day care centers" are different from "preschools" because they do not provide the kinds of learning programs that rise to the level of "preschool" education; (2) since "child day care centers" are distinct from "preschools," they would have been separately denominated in 29 U.S.C. Sec. 203(s)(1)(B) if Congress had intended to extend the FLSA to "child day care center" staff, but Congress chose not to; and (3) since "child day care centers" are merely custodial, not educational, in nature, the FLSA should not apply to them because they are different from the other institutions that are enumerated in 29 U.S.C. Sec. 203(s)(1)(B).

II

An employer must pay the federal minimum wage, and overtime rates for work that exceeds the federal maximum-hour ceiling, to any employee who is: (1) engaged in commerce or in the production of goods for commerce, or (2) employed in an enterprise engaged in commerce or in the production of goods for commerce. 29 U.S.C. Secs. 206, 207. "[W]ithin the tests of coverage fashioned by Congress, the Act has been construed liberally to apply to the furthest reaches consistent with congressional direction." Mitchell v. Lublin, McGaughy & Assocs., 358 U.S. 207, 211, 79 S.Ct. 260, 264, 3 L.Ed.2d 243 (1959).

[An "e]nterprise engaged in commerce or in the production of goods for commerce" means an enterprise that--

is engaged in the operation of a hospital, an institution primarily engaged in the care of the sick, the aged, or the mentally ill or defective who reside on the premises of such institution, a school for mentally or physically handicapped or gifted children, a preschool, elementary or secondary school, or an institution of higher education....

29 U.S.C. Sec. 203(s)(1)(B) (emphasis added). ²

The statute further defines certain of its terms. An " '[e]lementary school' means a day or residential school which provides elementary education, as determined under State law." Id. Sec. 203(v) (emphasis added). A " '[s]econdary school' means a day or residential school which provides secondary education, as determined under State law." Id. Sec. 203(w) (emphasis added). However, the statute does not define a "preschool."

The statute's legislative history casts little light on whether Congress considered custodial "child day care centers" to be "preschools." The basic text of 29 U.S.C. Sec. 203(s)(1)(B) was adopted in the Fair Labor Standards Amendments of 1966. ³ In those amendments, Congress extended the FLSA for the first time to employees of elementary and secondary schools. ⁴ However, "any employee employed in the capacity of academic administrative personnel or teacher in elementary or secondary schools" was explicitly exempted from coverage, as a specified example included under the general exemption for employees "in a bona fide executive, administrative, or professional capacity." ⁵ Such employees remain exempt today. 29 U.S.C. Sec. 213(a)(1).

Although the 1966 amendments did not include "preschools" in the new statutory formula, they were added to the law in the Education Amendments of 1972. ⁶ A brief gloss in the House Report suggests that "preschools" were incorporated into the law, based on economic characteristics that they share with elementary and secondary schools. ⁷ However, the specific exemption for teachers was not extended to include employees who teach in "preschools," though the general language of the "professional capacity" exemption would still seem to be applicable.

The United States Department of Labor, the federal agency that has the greatest expertise in administering federal fair labor standards law, directs us to a 1974 opinion letter issued by its Wage-Hour Administrator concerning whether certain child-custodial programs would be eligible for a retail-establishment exemption. In pertinent part, the opinion stated:

There is no legislative history on preschools which might provide guidance as to Congressional desire and intent in regard to the scope of the term "preschools[."] However ... it is the Wage and Hour Division's position that kindergartens, nursery schools, day care centers, and other preschools provide some elements of basic education and, therefore, are outside the retail concept....

Therefore, we find that no readily recognizable criteria can be established to set apart the two types of preschool facilities for purposes of recognizing one as retail in nature as you suggest.

Wage & Hour Opinion Letter No. 1346 (Oct. 24, 1974), Lab.L.Rep. (CCH) p 30,953 (June 1973-Sept. 1978 Transfer Binder) (emphasis added). Similarly, in DOL's Field Operations Handbook (FOH), setting forth the agency's internal enforcement guidelines to assist compliance officers, "preschools" are defined as "any enterprise ... which provides for the care and protection of infants or preschool children outside their own homes during any portion of a 24-hour day.... This includes day care centers, nursery schools, [and] kindergartens...." FOH Sec. 12g03 (emphasis added); see also Preschools Under the Fair Labor Standards Act 2-3 (United States Dep't of Labor, Wage & Hour Pub. 1364 rev. Mar. 1976) (same).

Because DOL's Wage and Hour Administrator is the primary federal authority entrusted with determining the FLSA's scope, these interpretations, "while not controlling upon the courts by reason of their authority, do constitute a body of experience and informed judgment to which the courts and litigants may properly resort for guidance." Mabee v. White Plains Publishing Co., 327 U.S. 178, 182, 66 S.Ct. 511, 513, 90 L.Ed. 607 (1946) (citing Skidmore v. Swift & Co., 323 U.S. 134, 140, 65 S.Ct. 161, 164, 89 L.Ed. 124 (1944)).

Two of our sister circuits have previously considered this troubling question and have arrived at opposite conclusions. In Marshall v. Rosemont, Inc., 584 F.2d 319 (9th Cir.1978), the court determined from the statutory text's listing of institutions, hospitals, and schools that "in the legislation a 'preschool' is an institution of some kind which is a part of the school system." Id. at 321. Therefore, the court held that the FLSA does not extend to child day care centers, which the court regarded as "essentially custodial in nature [and] in no way regulated by the State of Arizona as being a part of the state's school system." Ibid.

The Tenth Circuit specifically rejected the Ninth Circuit's analysis two years later. I...