Shultz v. Crotty Brothers Texas, Inc., Civ. A. No. 5822.

CourtU.S. District Court — Eastern District of Texas
Writing for the CourtFISHER
Citation310 F. Supp. 761
PartiesGeorge P. SHULTZ, Secretary of Labor, United States Department of Labor, Plaintiff, v. CROTTY BROTHERS TEXAS, INC., et al., Defendants.
Decision Date16 February 1970
Docket NumberCiv. A. No. 5822.

310 F. Supp. 761

George P. SHULTZ, Secretary of Labor, United States Department of Labor, Plaintiff,
v.
CROTTY BROTHERS TEXAS, INC., et al., Defendants.

Civ. A. No. 5822.

United States District Court, E. D. Texas, Beaumont Division.

February 16, 1970.


310 F. Supp. 762

L. H. Silberman, Solicitor of Labor, Washington, D. C., Major Parmenter, Reg. Sol. Truett E. Bean, Atty., U. S. Department of Labor, Dallas, Tex., for plaintiff.

Warren Whitham, Spafford, Freedman, Hamlin, Gay & Whitham, Dallas, Tex., for defendants.

MEMORANDUM OPINION

FISHER, Chief Judge.

The Secretary of Labor sues to enjoin alleged violations of the minimum wage and overtime provisions of the Fair Labor Standards Act of 1938, as amended, 29 U.S.C.A. §§ 201-219. The Defendant, Crotty Brothers Texas, Inc., operates a cafeteria located on the plant premises of Neches Butane Products Company in Port Neches, Texas. Neches Butane has a contract with Crotty Brothers Texas under which the letter is to operate food service facilities for the purpose of furnishing "proper, hot and cold food and food service to the employes" of Neches Butane.

Neches Butane is engaged in the manufacture or production and interstate shipment of butadine, a liquefied petroleum gas which is highly volatile. The plant is enclosed by a steel wire mesh fence, and there are normally two gates in use, each manned by a guard. Persons not employed at the plant are admitted after being issued a pass at a reception office at the entrance. Approximately 225 processing employees work each of three daily shifts; they are given no time off for a meal. Other employees are allowed a thirty-minute lunch period.

The food service operation here involved is located in a separate brick building which, along with all fixed equipment and facilities, is owned by Neches Butane. Neches Butane bears all operating expenses and pays Crotty Brothers Texas a sum based upon the earnings of the food service operation.

310 F. Supp. 763
Neches Butane also retains control over the salaries and wages paid the employees in question. Under the contract Crotty Brothers Texas is to "furnish proper * * * food * * * to the employes" of Neches Butane at such time as the later shall designate. All food and supplies are purchased by Crotty Brothers Texas. All persons engaged in preparing and serving the food are hired and subject to dismissal by Crotty Brothers Texas

Service is cafeteria style. Breakfast is regularly served from 6:00 a.m. to 7:30 a.m., and lunch from 11:30 a.m. to 12:30 p.m. The cafeteria is ordinarily closed thereafter. Payment for meals is ordinarily made in cash to the cashier at the end of the cafeteria line. However, in the case of certain plant employees doing overtime work, Neches Butane pays for the meal and the employees may be given chips to give to the cashier, or an order for a certain number of meals will be presented by a supervisor to the cashier, which chips or orders are later redeemed by Crotty Brothers Texas for cash.

The cafeteria serves anyone who comes, and plant employees are not specially identified or accommodated in any manner differently from anyone else who might come down the serving line. It appears that persons who were not employees of Neches Butane, such as meat, grocery, and soft drink salesmen, ate in the cafeteria.

It has been stipulated that the activities of the five defendants in this case, including Crotty Brothers Texas, constitute "an enterprise engaged in commerce or in the production of goods for commerce" within the meaning of §§ 3(r) and 3(s) of the Act. It is therefore conceded that the minimum wage and overtime provisions of the Act were at all material times applicable to the employees of Defendant Crotty Brothers Texas unless they are exempted by some other specific provision.1 It appears that during the period in question many of these employees were being paid as low as 85 cents to one dollar per hour and that they received no overtime compensation for hours worked in excess of 40 per week. Plaintiff claims that Defendant's employees were therefore underpaid in the approximate amount of $10,250 during the period from February 1, 1966, to June 1, 1969.

Provisions respecting minimum wage and overtime are set out in §§ 6 and 7 of the Act. Plaintiff alleges violations of the Act for a period commencing with and subsequent to February 1, 1966. Defendants claim that the employees in question are exempt from both the minimum wage and overtime provisions for the entire period by virtue of § 13(a) (2). Further, Defendants maintain that the employees in question are exempt from both the minimum wage and overtime provisions for the period prior to February 1, 1967, by virtue of § 13(b) (8), and from the overtime provisions subsequent to February 1, 1967, by virtue of § 13(b) (18).

Section 13(a) (2) provides exemption from minimum wage and overtime provisions for the employees of "any retail or service establishment," as defined, provided further that more than 50% of the establishment's annual dollar volume of sales of goods or services is made within the state in which it is located and that such establishment has an annual dollar volume of sales less than $250,000. Section 13(b) (8) provides exemption from the overtime (though not the minimum wage) provisions for employees of an establishment which is a "restaurant." Section 13(b) (18) provides exemption from the overtime (though not the minimum

310 F. Supp. 764
wage) provisions for employees of a "retail or service establishment who are employed primarily in connection with the preparation or offering of food or beverages for human consumption, either on the premises, or by such services as catering * * *." Prior to the 1966 amendments, effective February 1, 1967, the latter two sections provided total exemption from both minimum wage and overtime coverage. The effect of those amendments was to continue the total exemption under § 13(a) (2) but to remove the "restaurant" and "food service" exemptions to § 13(b), which provides exemption only from the overtime provisions

Plaintiff contends that the food service activities of Crotty Brothers Texas at the Neches Butane plant do not constitute a "retail or service establishment" within the meaning of that term as employed in §§ 13(a) (2) and 13(b) (18), and that such operation was not a "restaurant" within the meaning of that term as employed in § 13(b) (8). The term "retail or service establishment" is defined in § 13(a) (2) as follows:

"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 term "restaurant" is not specially defined for the purposes of § 13(b) (8). In sum, Plaintiff argues that Crotty Brothers Texas is not entitled to the claimed exemptions because (1) its food service operation is not a "retail" service as a matter of law, (2) more than 25% of its annual dollar volume of sales are for "resale", and (3) the food service operation cannot be a "restaurant" because it is not also a retail service establishment.

THE "RETAIL" ARGUMENT

Plaintiff's interpretation of the statute in this particular is set out in his interpretive bulletin, known as Regulation 779, as follows:

Section 779.24 * * * Not every establishment which engages in retail selling of goods or services constitutes a retail or service establishment within the meaning of the Act.
Section 779.316. The term retail is alien to some businesses * * *. It was the intent of Congress to exclude such businesses from the term retail or service establishment.
Section 779.318. Typically a retail or service establishment is one which sells goods or services to the general public.
Section 779.319. Generally, however, an establishment, wherever located, will not be considered a retail or service establishment * * * if it is not ordinarily available to the general consuming public.

In an early decision the Supreme Court gave § 13(a) (2) a quite narrow construction. In Roland Elev. Co. v. Walling, 326 U.S. 657, 66 S.Ct. 413, 90 L.Ed. 383 (1946), the Court wrote:

"It is rare, if not impossible, for an employee who is engaged in an occupation necessary to the production of goods for interstate commerce to be said to be at the same time an employee engaged in a retail or service establishment whose selling and servicing is confined to ultimate consumers. These employments are largely mutually exclusive. To the extent that sales or services are necessary for the production of goods for interstate commerce they generally are by that hypothesis not sales or services to an ultimate consumer for his personal use and, accordingly, are neither `retail' sales nor services of a comparable character, within the meaning of § 13(a) (2)." At 666-667, 66 S.Ct. at 417.

This reflected a pervasive scheme of statutory construction. Coverage under the Act for a large category of employees is determined by the definition of the term "engaged in the production

310 F. Supp. 765
of goods" for interstate commerce as it is used in Sections 6 and 7. The term is defined in § 3(j), which at the time of the Roland decision read as follows
"* * * for the purposes of this Act an employee shall be deemed to have been engaged in the production of goods if such employee was employed in producing, manufacturing, mining, handling, transporting, or in any other manner working on such goods, or in any process or occupation necessary to the production thereof, in any State." (Emphasis added).

Thus the Court in Roland seized upon the language of this definition in holding that the § 13(a) (2) exemption is not available to employees "engaged in the production of goods for commerce."

Shortly after and in reliance upon the Roland decision, a district court decided the case of McComb v. Factory Stores Co. of Cleveland, 81...

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9 practice notes
  • Futrell v. Columbia Club, Inc., No. IP 69-C-176
    • United States
    • United States District Courts. 7th Circuit. United States District Court (Southern District of Indiana)
    • August 2, 1971
    ...natural and locational restrictions and artificial membership restriction. Shultz v. Crotty Brothers Texas, Inc., E.D.Tex., 1970, 310 F.Supp. 761; Wirtz v. Pickett Food Service, D.N.M., 1968, 304 F.Supp. 784. Most persuasive to the Court is the holding in Shultz v. Deane Hill Country Club, ......
  • Diggs v. Ovation Credit Servs., Inc., Case No. 3:18-cv-367-J-34MCR
    • United States
    • United States District Courts. 11th Circuit. United States District Court of Middle District of Florida
    • March 27, 2020
    ...establishment possesses a retail concept." Rodriguez, 2015 WL 668009, at *7 (citing Shultz v. Crotty Brothers Tex., Inc., 310 F. Supp. 761, 767 (E.D. Tex. 1970) ). Nevertheless, the DOL regulations provide guidance for making such a determination by, among other things, setting forth s......
  • Schwind v. Ew & Associates, Inc., No. 03 CIV. 9904(WCC).
    • United States
    • United States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York
    • May 25, 2005
    ...Training Centers, L.P., No. 02 Civ. 1310, 2003 WL 22388448, at *5 (N.D.Tex. Sept. 30, 2003) (citing Shultz v. Crotty Bros. Texas, Inc., 310 F.Supp. 761, 767 In the case at bar, defendants operate a training and consulting firm which provides computer training for software programs and syste......
  • Maple v. Citizens Nat. Bank & Trust Co., No. CIV-77-0340-D.
    • United States
    • United States District Courts. 10th Circuit. Western District of Oklahoma
    • August 19, 1977
    ...F.Supp. 1380 (S.D.Ill.1973); Basic Boats, Inc. v. United States, 311 F.Supp. 596 (E.D.Va.1970); Shultz v. Crotty Brothers Texas, Inc., 310 F.Supp. 761 (E.D.Tex.1970); Tinker v. Des Moines Independent Community School District, 258 F.Supp. 971 (S.D.Iowa 1966), aff'd, 383 F.2d 988 (Eighth Cir......
  • Request a trial to view additional results
9 cases
  • Futrell v. Columbia Club, Inc., No. IP 69-C-176
    • United States
    • United States District Courts. 7th Circuit. United States District Court (Southern District of Indiana)
    • August 2, 1971
    ...natural and locational restrictions and artificial membership restriction. Shultz v. Crotty Brothers Texas, Inc., E.D.Tex., 1970, 310 F.Supp. 761; Wirtz v. Pickett Food Service, D.N.M., 1968, 304 F.Supp. 784. Most persuasive to the Court is the holding in Shultz v. Deane Hill Country Club, ......
  • Diggs v. Ovation Credit Servs., Inc., Case No. 3:18-cv-367-J-34MCR
    • United States
    • United States District Courts. 11th Circuit. United States District Court of Middle District of Florida
    • March 27, 2020
    ...establishment possesses a retail concept." Rodriguez, 2015 WL 668009, at *7 (citing Shultz v. Crotty Brothers Tex., Inc., 310 F. Supp. 761, 767 (E.D. Tex. 1970) ). Nevertheless, the DOL regulations provide guidance for making such a determination by, among other things, setting forth s......
  • Schwind v. Ew & Associates, Inc., No. 03 CIV. 9904(WCC).
    • United States
    • United States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York
    • May 25, 2005
    ...Training Centers, L.P., No. 02 Civ. 1310, 2003 WL 22388448, at *5 (N.D.Tex. Sept. 30, 2003) (citing Shultz v. Crotty Bros. Texas, Inc., 310 F.Supp. 761, 767 In the case at bar, defendants operate a training and consulting firm which provides computer training for software programs and syste......
  • Maple v. Citizens Nat. Bank & Trust Co., No. CIV-77-0340-D.
    • United States
    • United States District Courts. 10th Circuit. Western District of Oklahoma
    • August 19, 1977
    ...F.Supp. 1380 (S.D.Ill.1973); Basic Boats, Inc. v. United States, 311 F.Supp. 596 (E.D.Va.1970); Shultz v. Crotty Brothers Texas, Inc., 310 F.Supp. 761 (E.D.Tex.1970); Tinker v. Des Moines Independent Community School District, 258 F.Supp. 971 (S.D.Iowa 1966), aff'd, 383 F.2d 988 (Eighth Cir......
  • Request a trial to view additional results

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