Shultz v. Deane-Hill Country Club, Inc.

• Decision Date: 26 September 1969
• Docket Number: Civ. A. No. 6606.
• Citation: 310 F. Supp. 272
• Parties: George P. SHULTZ, Secretary of Labor v. DEANE-HILL COUNTRY CLUB, INC.
• Court: U.S. District Court — Eastern District of Tennessee

310 F. Supp. 272

George P. SHULTZ, Secretary of Labor v. DEANE-HILL COUNTRY CLUB, INC.

Civ. A. No. 6606.

United States District Court, E. D. Tennessee, N. D.

September 26, 1969.

COPYRIGHT MATERIAL OMITTED

Marvin Tincher, Regional Attorney, Dept. of Labor, Nashville, Tenn., for plaintiff.

W. E. Badgett, Knoxville, Tenn., for defendant.

MEMORANDUM

ROBERT L. TAYLOR, District Judge.

George P. Shultz, Secretary of Labor, seeks to enjoin Deane-Hill Country Club, Inc. from violating Sections 15(a) (2) and 15(a) (5) of the Fair Labor Standards Act of 1938, as amended. 29 U.S. C. § 215(a) (2) and (5). The Secretary also seeks payment of any unpaid minimum wages and overtime compensation due employees under the Act. 29 U.S.C. § 217.

The Secretary claims that Deane-Hill is an enterprise within the meaning of Section 3(r) of the Act.¹ 29 U.S.C. § 203(r). The Secretary contends that during the period since February 1, 1967 the Deane-Hill facilities and activities were related and performed through unified operations and under common control and for common business purposes. He says that the enterprise has employees engaged in interstate commerce or in the production of goods for commerce, including employees handling, selling or otherwise working on goods that have been moved in, or produced for commerce by other persons, and that its annual gross volume of business was not less than $500,000.00 ($250,000.00 since February 1, 1969) exclusive of excise taxes. Therefore, he concludes that Deane-Hill meets the test of a covered enterprise as defined in Section 3(s) (1) of the Act (29 U.S.C. § 203(s) (1)), which is as follows:

"(s) `Enterprise engaged in commerce or in the production of goods for commerce' means an enterprise which has employees engaged in commerce or in the production of goods for commerce, including employees handling, selling, or otherwise working on goods that have been moved in or produced for commerce by any person, and which —

"(1) during the period February 1, 1967, through January 31, 1969, is an enterprise whose annual gross volume of sales made or business done is not less that $500,000 (exclusive of excise taxes at the retail level which are separately stated) or is a gasoline service establishment whose annual gross volume of sales is not less than $250,000 (exclusive of excise taxes at the retail level which are separately stated), and beginning February 1, 1969, is an enterprise whose annual gross volume of sales made or business done is not less than $250,000 (exclusive of excise taxes at the retail level which are separately stated);"

The Secretary likewise contends that during the period since February 1, 1967 Deane-Hill has either paid some of its employees less than the minimum wage or has failed to pay overtime compensation as provided by the Act;² that in the instances where hours worked records have been maintained, these violations appear on the face of Deane-Hill's payroll records; that Deane-Hill has failed to maintain records of daily and total weekly hours worked with respect to certain employees; and that Deane-Hill has refused to make its records available to the Secretary's representative.

Defendant Deane-Hill denies that it is covered by the Act. It claims that it is the ultimate consumer, and when any goods, chattels, or other articles in commerce reach it, such goods have ceased to be in interstate commerce at the time of delivery to defendant. Defendant denies that it is engaged in interstate commerce to such an extent as to be covered by the Act because its annual gross volume of sales or business done is less than that amount required by the Act. Defendant denies that any pro shop or golf rental operations conducted at its location should be included within its annual gross volume of sales because these activities are not part of its "enterprise." Defendant subsequently amended its answer to additionally claim that any complaint was barred by a good faith reliance upon an interpretation of the Administrator of the Wage and Hour Division of the Department of Labor under Section 10 of the Portal-to-Portal Act of 1947. 29 U.S.C. § 259.

Defendant is a Tennessee corporation located in Knoxville, Tennessee. It operates a private country club and sells goods and services to its members or their guests. The membership is around 1,400, 450 of which are golf members. There are approximately 1,490 outstanding shares of stock, 595 of which are owned by Mr. Jack Comer, or about 40%. Mr. Comer has voted by proxy 283 shares, or 19%, at one or more meetings of the stockholders. Mr. Comer, his wife and brother are members of the Board of Directors. Dr. J. P. Cullom, the owner of 215 shares of stock, is Chairman of the Board. The President, Mr. Lloyd Cannon, owns one share of stock. He is a full-time employee and works as night manager. Mr. J. W. Townsend is the day manager. The remaining shares of stock are owned by some 55 to 60 persons owning a minimum of one share to a maximum of 65 shares.

Deane-Hill's club building is located on a parcel of land consisting of 160 acres. There are also located on the land a club house, a swimming pool and a golf course. Facilities for serving food and beverages are located within the club house. There is also a Pro Shop. Club members desiring to use the golf course are required to check in through the Pro Shop where they pay green fees and driving range fees, rent golf carts and purchase any golf equipment or supplies they may need. These proceeds are turned over to the defendant at the end of the day. Deane-Hill furnishes the space, pays all the utility bills for the Pro Shop, pays the wages and furnishes meals to the employees working in the Pro Shop. The basic inventory of the Pro Shop is owned by the defendant, with the golf professional ordering any merchandise as needed.

Prior to October 1, 1967, Mr. Lloyd Foree was defendant's golf professional, and Mr. Vernon Thwaites was the assistant professional. Each was paid a weekly salary by the defendant. The salary of Mrs. Thwaites, who worked in the Pro Shop, was also paid by the defendant. Foree left on October 26, 1967 and was replaced by Thwaites, who made no investment in the merchandise on hand. Thwaites' employment terminated on September 24, 1968, and defendant was without a golf professional until February 15, 1969, when Foree returned. Foree made no investment in the merchandise stocked. He stated, in effect, that he wasn't financially able to pay for the stock when he returned to Deane-Hill. However, as he becomes financially able, he expects to pay Mr. Comer for the inventory. As he repays Mr. Comer's advancements, he will receive the profits from the Pro Shop. He also stated that he ran the Pro Shop as his own business.

Since February 24, 1967, Jesse Townsend, defendant's day manager, has made all bank deposits for the Pro Shop, approved the merchandise ordered and signed all checks in payment thereof and kept the books and records, including those pertaining to golf cart income. Foree, the pro, has recently received authority to sign checks on the Pro Shop's account.

The golf carts used by defendant's members on its golf course are owned by Country Clubs, Inc., a Tennessee corporation owned exclusively by Mr. Jack Comer, President and Treasurer, and his wife, Marjorie Comer, Secretary. Mr. Lloyd Cannon, night manager for the defendant, is Vice President of Country Clubs, Inc. Country Clubs, Inc. has no employees of its own and the carts are repaired, maintained, and generally looked after by defendant's employees, but Country Clubs, Inc. pays the mechanics of defendant $200.00 extra for looking after the carts. Defendant furnishes parking and storage space for the carts. Club members renting a golf cart are required to enter into a written lease. Exhibit 1 is a lease form. The defendant's name and address head the form. The form contains language that indicates "The Club" is the lessor. Mr. Comer testified that this form was discontinued before the investigation which preceded this suit. Mr. Foree, the present pro, stated that the form had been discontinued within the last month. Cart rental fees are collected by the Pro Shop employees. The defendant retains 25% of the gross rental receipts and turns the balance over to Country Clubs, Inc.

All of the activities conducted at the defendant's country club are related activities. They are conducted through unified operation and under common control for a common business purpose. Wirtz v. Columbian Mutual Life Insurance Co., 380 F.2d 903 (C.A.6, 1967). The cart rental and Pro Shop activities are included in the defendant's enterprise activities. Wirtz v. Barnes Grocer Co., et al, 398 F.2d 718 (C.A.8, 1968); West v. Wal-Mart, Inc., 264 F.Supp. 158 (W.D.Ark., 1967).

The Court further finds that defendant's golf professionals are not independent contractors within the meaning of Section 3(r) as performing related activities for the enterprise. Rutherford Food Corp. v. McComb, 331 U.S. 722, 67 S.Ct. 1473, 91 L.Ed. 1772 (1947); Western Union Tele. Co. v. McComb, 165 F. 2d 65 (C.A.6) cert. den. 333 U.S. 862, 68 S.Ct. 743, 92 L.Ed. 1141, reh. den. 333 U.S. 883, 68 S.Ct. 911, 92 L.Ed. 1158 (1948); and see this Court's ruling in Burry v. National Trailer Convoy, Inc., 239 F.Supp. 85 (E.D.Tenn., 1963), aff'd. 338 F.2d 422 (C.A.6, 1964).

Mr. Townsend stated that the revenue for the year 1967 was $497,762.00, including dues but which did not include income from the golf carts, Pro Shop, sales of merchandise and total golf cart rentals. With these items included, the annual gross volume of sales or business would exceed $500,000.00. He further stated that the revenues for 1968, not including the Pro Shop revenues, amounted to $539,999.00.

In determining whether the gross volume test of Section 3(s) is met, the gross receipts of all the activities which make up the enterprise must be counted. Wirtz v. Jernigan, 405 F.2d 155, 159 (C....