RETAIL STORE EMP. U., LOC. 400 v. Drug Fair-Community Drug Co.

• Decision Date: 22 December 1969
• Docket Number: Civ. A. No. 2826-64.
• Parties: RETAIL STORE EMPLOYEES UNION, LOCAL 400 et al., Plaintiff, v. DRUG FAIR-COMMUNITY DRUG CO., Inc., Defendant.
• Court: U.S. District Court — District of Columbia

307 F. Supp. 473

RETAIL STORE EMPLOYEES UNION, LOCAL 400 et al., Plaintiff, v. DRUG FAIR-COMMUNITY DRUG CO., Inc., Defendant.

Civ. A. No. 2826-64.

United States District Court District of Columbia.

December 22, 1969.

Ira M. Lechner, Spelman, Lechner & Wagner, Arlington, Va., for plaintiff.

Earle K. Shawe, William J. Rosenthal, Shawe & Rosenthal, Baltimore, Md., for defendant.

OPINION

McGARRAGHY, District Judge.

This action was originally brought by the Retail Store Employees Union, Local 400, and fifty-two licensed pharmacists against the pharmacists' employer, Drug Fair-Community Drug Company, Inc., for overtime pay allegedly due under the Fair Labor Standards Act. (Act of June 25, 1938, C. 676, 52 Stat. 1060; 29 U.S. C. § 207; hereinafter "the Act.")

Drug Fair is a large retail drug store chain which operates approximately one hundred nineteen stores in the Metropolitan Washington, D. C. area. At all times material, Drug Fair has received from its operations gross sales in excess of $1,000,000.00 annually and each of defendant's individual retail drug stores in which each of the plaintiffs is or was employed had annual gross sales receipts in excess of $250,000.00.

This action has been dismissed as to plaintiffs, Retail Store Employees Union and forty-seven of the individual pharmacists.

The remaining five plaintiffs contend that, in violation of the Act, as interpreted by the lawful regulations of the Wage and Hour Administrator, defendant has failed to pay the plaintiffs any overtime compensation (time-and-a-half) for hours worked in excess of forty-four hours during the period September 3, 1963 to September 3, 1964; and for hours in excess of forty-two hours from September 3, 1964 to September 3, 1965; and for the the hours in excess of forty hours from September 3, 1965 to June 30, 1969.

Pursuant to Section 16(b)¹ of the Act, plaintiffs seek the unpaid overtime, an equal amount in liquidated damages, attorneys' fees and costs.

Jurisdiction is conferred on this court by the provisions of 28 U.S.C. § 1337.

Section 13(a) (1)² provides that "executive, administrative and professional employees" are exempt from the overtime requirements of Section 7.³

Defendant contends that the plaintiffs, as pharmacists, are employed by the defendant in a bona fide "professional" capacity within the meaning of Section 13(a) (1) and the Regulations issued thereunder, and are, therefore, exempt from overtime compensation benefits of the Act.

Defendant also contends that coverage of the plaintiffs under the Act on the basis of their being employees of an "enterprise" engaged in commerce, as defined by Section 3(s) (1)⁴ is beyond any power of Congress to regulate commerce.

Defendant also contends that the provisions of Section 13(a) (1) granting authority to the Secretary of Labor or his delegate to establish regulations "defining and delimiting" what is meant by an executive, administrator or professional is an unconstitutional delegation of legislative authority, and further, that such regulations defining a professional employee in terms of his form of compensation are vague, unreasonable and capricious.

The court will consider the above constitutional issues first.

Until the 1961 Amendments to the Act, the Fair Labor Standards Act did not apply to employees in retail establishments like Drug Fair. Section 3(s) applied the so-called "enterprise doctrine" to retail establishments. The enterprise doctrine meant that instead of only extending protection to employees individually connected to interstate commerce, the Act now covered all employees of any enterprise engaged in commerce. The court is of the opinion that Drug Fair squarely falls within the scope of Section 3(s) of the Act. Therefore, its employees are covered by the Act.

The constitutionality of the enterprise doctrine has been firmly established by the reasoning in United States v. Darby, 312 U.S. 100, 61 S.Ct. 451, 85 L.Ed. 609, 1941, and by Maryland v. Wirtz, 392 U.S. 183, 188-193, 88 S.Ct. 2017, 2019-2022, 20 L.Ed.2d 1020, 1026-1029, 1967, and needs no further comment here.

It is also well established that the regulations issued by the Wage and Hour Administrator are valid and binding as a reasonable exercise of delegated authority. Craig v. Far West Engineering Company, (9th Cir., 1959), 265 F.2d 251, 257, 72 A.L.R.2d 1143, 1150, cert. den. 361 U.S. 816, 80 S.Ct. 57, 4 L.Ed.2d 63; Sun Publishing Company v. Walling, (6th Cir., 1944), 140 F.2d 445, 449, cert. den. 322 U.S. 728, 64 S.Ct. 946, 88 L.Ed. 1564. See also Fanelli v. United States Gypsum Co., (2nd Cir. 1944), 141 F.2d 216, 218, and Walling v. Yeakley, (10th Cir. 1944), 140 F.2d 830, 832.

Defendant attacks the Wage and Hour Administrator's Regulation requiring that an "executive, administrative or professional" employee receive a minimum salary before being exempt under the Act as arbitrary and capricious. However, numerous courts have held these regulations to be a reasonable exercise of authority delegated to the Administrator. Walling v. Yeakley, supra; Helliwell v. Haberman, (2nd Cir. 1944), 140 F.2d 833, 834; Craig v. Far West Engineering Company, supra, 265 F.2d pp. 259-260; Tripp v. May (7th Cir. 1951), 189 F.2d 198, 201-202; Wirtz v. Mississippi Publishers Corp. (5th Cir. 1966), 364 F.2d 603, 608; Chepard v. May (D.C.S.D.N.Y. 1947), 71 F.Supp. 389, 391-392.

This court is of the opinion that the Regulation attacked here (29 C.F.R. 541.3) is entirely reasonable and well within the authority delegated to the Administrator, and that the court is bound by it.

As was said in Craig v. Far West Engineering Company, supra, 265 F.2d at p. 259:

* * * We agree with the other circuits that this particular regulation pertaining to "salary basis" compensation must be taken to mean precisely what it says, and that it is a reasonable exercise of authority delegated to the Administrator. We say this because upon examination of the history behind the promulgation of these regulations, it becomes clear that the rationale underlying them is sound and apparently the one practical method of "defining and delimiting" the rather vague and ambiguous terms used in the statute. Employers, even more than employees, desire some certainty in the law. The report and recommendations of the presiding officer who conducted hearings on proposed amendments to the regulations in 1940 indicates that the employers participating in the hearings—were nearly unanimous in approving the salary test because "a salary qualification in the definition of the term `executive' is a valuable and easily applied index to the `bona fide' character of the employment for which exemption is claimed" * * *.⁵

The court now turns its attention to the central issue in this case. The question presented is very clear, if not its resolution. If the plaintiffs are not within the scope of the exemptions enumerated in Section 13(a) (1), then they are covered by the Act and are entitled to compensation for overtime pay.

Section 13 provides, in pertinent part, that:

* * * the provisions of sections six and seven (relating to minimum hours and overtime pay) shall not apply with respect to any employee employed in a bona fide executive, administrative, or professional capacity * * *.

The Regulations of the Wage and Hour Administrator establish five basic criteria which an employee must meet to be considered an exempt professional employee. The Regulation, at 29 C.F.R. 541.3 provides, in pertinent part:

The term "employee employed in a bona fide * * * professional capacity" in section 13(a) (1) of the Act shall mean an employee:

(a) Whose primary duty consists of the performance of work requiring knowledge of an advanced type in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction and study * * * (b) Whose work requires the consistent exercise of discretion and judgment in its performance,

(c) Whose work is predominantly intellectual * * *

(d) Who does not devote more than 20 percent of his hours worked in the workweek to activities which are not an essential part of and necessarily incident to the work described in paragraphs (a) through (c) * * *

(e) Who is compensated for his services on a salary or fee basis at a rate of not less than $115 per week * * *

Plaintiffs have the burden of proof as to all elements of their claim for relief. They must prove that there exists an employee-employer relationship; that there was engagement in activities within the coverage of the Act; that the employer violated the wage requirements; and that a definite amount of compensation is due.

But the burden is clearly on the employer to affirmatively show that their employees are within the scope of a particular exemption. Idaho Sheet Metal Works, Inc. v. Wirtz, 1966, 383 U.S. 190, 206, 86 S.Ct. 737, 747, 15 L.Ed.2d 694, 704, rehearing den. 383 U.S. 963, 86 S. Ct. 1219, 16 L.Ed.2d 305; Arnold v. Ben Kanowsky, Inc., 1960, 361 U.S. 388, 392-394, 80 S.Ct. 453, 456, 4 L.Ed.2d 393, 396, rehearing den. 362 U.S. 945, 80 S.Ct. 803, 4 L.Ed.2d 772; Walling v. General Industries Co., 1947, 330 U.S. 545, 547-548, 67 S.Ct. 883-884, 91 L.Ed. 1088, 1090; Craig v. Far West Engineering Company, supra, 265 F.2d 257.⁶

It is unnecessary to discuss whether plaintiffs comply with all five of the criteria mentioned at 29 C.F.R. 541.3. The parties have stipulated that plaintiffs did comply with the first four criteria. (29 C.F.R. 541.3(a) through (d)). The real matter in dispute in this case is whether plaintiffs are "compensated on a salary basis" under subsection (e).

A Regulation at 29 C.F.R. 541.118 defines, at length, what constitutes a salary:

(a) An employee will be considered to be paid "on a salary basis" within the meaning of the regulations if * * * he regularly receives each pay period on a weekly, or less frequent, basis a predetermined amount constituting all or part of his compensation, which

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