Wirtz v. Keystone Readers Service, Inc., 26556.
| Citation | 418 F.2d 249 |
| Decision Date | 14 November 1969 |
| Docket Number | No. 26556.,26556. |
| Parties | W. Willard WIRTZ, Secretary of Labor, United States Department of Labor, Plaintiff-Appellee, v. KEYSTONE READERS SERVICE, INC., and Gary Waechter, d/b/a Ben Franklin Reading Club, Defendants-Appellants. |
| Court | United States Courts of Appeals. United States Court of Appeals (5th Circuit) |
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Alan Douglas Greene, Alan A. Bruckner, Bruckner & Greene, Miami, Fla., for defendants-appellants.
Charles Donahue, Solicitor, U. S. Dept. of Labor, Washington, D. C., Beverley R. Worrell, James H. Woodson, Regional Attys., U. S. Dept. of Labor, Atlanta, Ga., Bessie Margolin, Robert E. Nagle, Joel Chasnoff, Attys., U. S. Dept. of Labor, Washington, D. C., for plaintiff-appellee.
Before JOHN R. BROWN, Chief Judge, and GEWIN and GOLDBERG, Circuit Judges.
A man engaged in the stream of peddling magazine subscriptions seeks absolution for his failure to observe the requirements of federal wage and hour legislation. We deny absolution.
This action was brought under the Fair Labor Standards Act, 29 U.S.C.A. § 201 et seq., to enjoin Gary Waechter, an individual doing business as the Ben Franklin Reading Club, from violating the minimum wage, overtime, record keeping, and child labor provisions of the Act. There is no dispute that Waechter's personnel are "employees" within the meaning of the Act, or that Waechter's business is within the Act's general coverage. There is also no objection raised on appeal to the injunction of the trial court insofar as it relates to the child labor or applicable record keeping requirements. The only issues are whether Waechter can claim the "retail establishment" exemption of § 13(a) (2)1 and whether he can claim the "outside salesman" exemption of 13(a) (1).2 The trial court found that Waechter was not entitled to the claimed exemptions and that he had violated the Act as alleged by the Secretary. An injunction issued accordingly, and this appeal followed.
Waechter has been doing business as the Ben Franklin Reading Club since January 16, 1964. He maintains an office in North Miami Beach, Florida, and for a time during 1965 and 1966 maintained an additional office in Miami. Waechter is engaged in selling magazine subscriptions on an installment basis and in processing, collecting, and servicing such subscription sales. His operations have been conducted pursuant to a local franchise agreement with Keystone Readers Service, Inc., a Philadelphia, Pennsylvania, subscription agency, and a wholly owned subsidiary of Curtis Publishing Company.3 According to this agreement, Waechter is authorized to solicit magazine subscriptions in the state of Florida, and to forward such orders to Keystone. On July 1, 1966, Keystone assigned its rights under the agreement to John L. Glover of Atlanta, Georgia, who operates under a regional franchise agreement with Keystone.
Waechter obtains orders for magazine subscriptions primarily through door-to-door solicitation. This solicitation is performed in three stages — by "student salesmen," student managers, and verifiers, respectively. The "student salesmen" are boys of high school and college age — some as young as 13 — who are hired to make the first contact on a house-to-house canvass. They report daily to one of appellant's offices for briefing and for transportation to their respective routes.
At each home on his route the "student salesman" delivers a prepared talk, memorized from material provided by Waechter. He attempts to induce the householder to agree to subscribe to some of the magazines listed on a card supplied by Waechter. The prospect is told that he can receive four magazine subscriptions for a total price of 41 cents per week. If the prospect agrees to subscribe, the "student salesman" then asks him to sign an Order Card, which includes the following wording:
The "student salesmen" are instructed to ascertain, during the encounter with each prospect, whether the prospect meets certain qualifications established by Waechter. They are prohibited from collecting money, and are instructed not to discuss any method of payment with the potential customer. Should a prospect inquire about the method of payment, or the matter of pricing, the "student salesmen" are instructed merely to state that payments are due monthly and that someone else will obtain the customer's signature and collect the money.
When completed, a signed Order Card is taken by the "student salesman" to a student manager. The student manager subsequently contacts the same prospect, and, with the Order Card in hand, reviews the magazines selected. After confirming that the prospect meets Waechter's qualifications, the student manager explains Waechter's accelerated "pay as you read plan." This plan — which contains terms different from those represented by the "student salesman" and from those listed on the Order Card — provides for payment at $3.50 per month, payable in 30 months. If these terms are acceptable to the customer, he executes a Contract Form and makes the first payment to the student manager. The Contract Form also contains the following provision:
It is worthy of note that the Contract Form always replaces the Order Form as the final agreement, and Waechter will not accept a subscription order on the terms contained in the Order Card even if the customer so requests.
After a signed Contract Form is obtained by a student manager, the student manager returns to Waechter's office, where the contract is checked over by office personnel called verifiers. These verifiers make sure that the magazines selected fall within certain allowable groupings and that the Contract Form has been properly completed. In addition, a telephone verification is made to determine whether the customer understands the terms of the Contract Form agreement. Once verification has occurred, Waechter compensates the student managers, and they in turn compensate the "student salesmen" who work under them. Waechter then prepares a ledger sheet containing a list of magazines requested, publishers' names and addresses, and the down payment made by each customer. This information is forwarded to Glover in Atlanta. Waechter also regularly sends to Glover monies collected on previous subscription orders, and reports on such collections.
After Glover records the information on new orders, these orders are sent on to Keystone in Philadelphia, where they are processed by computer to determine whether the magazines ordered are authorized, whether the correct number has been specified, whether the magazines are properly priced, and whether any deficiencies exist in the order. If all of the proper conditions are not specified in the order, Keystone returns it to Waechter, who must then obtain the customer's approval for making the necessary changes. From Keystone, the processed orders are transmitted to the various publishers. The magazines are mailed directly from the publisher to the customer.
On these facts the district court concluded that the "student salesmen" could not qualify as "outside salesmen" within the meaning of § 13(a) (1) because they were not engaged in making sales of their own, but in doing promotional work for sales to be made by others, i. e., the student managers. The court found that such promotional work was not exempted under the authority of the applicable department Bulletin. 29 C.F.R. § 541.504(a).
The court also found that the Ben Franklin Reading Club was not an exempt "retail or service establishment" within the meaning of § 13(a) (1). Although the Club's annual gross receipts were less than $250,000.00, as required by the statute, the court found the exemption inapplicable because (a) more than 50 per cent of Waechter's annual dollar volume of sales are made outside the state of Florida, and (b) no concept of retail sales or servicing exists in the magazine industry.4
Waechter appeals from these determinations by the court below. We affirm. We find no substance to appellant's claim that the "student salesmen" are outside salesmen within the meaning of § 13(a) (1). We also agree with the district court's determination that appellant is not entitled to the retail establishment exemption of § 13(a) (2). On this point, however, we do not rely, as did the district court, on the absence of a retail concept in the magazine industry, a finding on which we express no opinion.5 Instead, we base our decision on the narrower ground that appellant does not maintain in his business the kind of "establishment" which Congress exempted under the Act.
We direct our attention first to the "retail establishment" exemption of § 13(a) (2). In its present form § 13 (a) (2) reads in pertinent part as follows:
"The provisions of sections 206 minimum wage and 207 maximum hours of this title shall not apply with respect to * * * any employee employed by any retail or service establishment * * * if more than 50 per cent 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; * * *. Emphasis added.
As the statute itself indicates, the retail establishment exemption of § 13(a) (2) applies only to "establishments," and not to businesses in their entirety. Thus the...
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