Wirtz v. Pickett Food Service, Inc.

• Decision Date: 08 July 1968
• Docket Number: Civ. No. 7246.
• Citation: 304 F. Supp. 784
• Parties: W. Willard WIRTZ, Secretary of Labor, United States Department of Labor, Plaintiff, v. PICKETT FOOD SERVICE, INC., Defendant.
• Court: U.S. District Court — District of New Mexico

304 F. Supp. 784

W. Willard WIRTZ, Secretary of Labor, United States Department of Labor, Plaintiff, v. PICKETT FOOD SERVICE, INC., Defendant.

Civ. No. 7246.

United States District Court D. New Mexico.

July 8, 1968.

Charles Donahue, Solicitor, Harry Campbell, Jr., Acting Regional Atty., and Truett E. Bean, Trial Atty., U. S. Dept. of Labor, Dallas, Tex., and John Quinn, U. S. Atty., Albuquerque, N. M., for plaintiff.

Wayne C. Wolf, Civerolo, Cushing & Hansen, Albuquerque, N. M., and Roy M. Fish, Fish & Montgomery, Springhill, La., for defendant.

MEMORANDUM OPINION

BRATTON, District Judge.

This action was brought by the Secretary of Labor to enjoin the defendant from withholding minimum and overtime wages allegedly due defendant's employees under the provisions of the Fair Labor Standards Act, and to enforce the Act's record-keeping provisions.

The defendant, Pickett Food Service, Inc., is a Texas corporation and a wholly owned subsidiary of Pickett Food Service, Inc. of Louisiana. It is agreed that these two corporations, together with Pickett Food Service of El Paso, form an enterprise within the meaning of § 203(r) and (s) of the Act. 29 U.S.C.A. § 203(r), (s) (1964), as amended, 29 U. S.C.A. § 203(r), (s) (1967). The issues to be determined are whether the activities of defendant's employees are a closely related process or an occupation directly essential to the production of goods for commerce, or whether the defendant's operation is within the purview of the exemption accorded retail and service establishments by the Act, Id. § 213(a) (2).

The defendant entered into a contract to provide cafeteria and food vending machine services for those persons employed at the National Aeronautical and Space Administration's Apollo test facility at White Sands Missile Range, some twenty miles from Las Cruces, New Mexico. Under the terms of the contract, defendant was to furnish morning and noon meals in its cafeteria at prices set by the contract. The premises and equipment were furnished by the Government. Defendant was to gain the profit or stand the loss from the operation.

Its employees' activities primarily revolved around the preparation and service of food to employees and visitors at the missile range.

The missile range itself was some distance from any town or any other eating place. Further, only those persons with passes were admitted to the facility, restricting its daily inhabitants to employees of the various N.A.S.A. contractors and authorized guests.

Lunch periods for those working at the facility were inadequate to allow them to leave the facility to lunch in town, particularly in view of the necessary, but time consuming, practice of checking passes before admitting persons to the facility.

The volume of business done by the defendant at the missile site, which never approached the $250,000 mark, was insufficient to make the operation profitable, and on June 30, 1967, it ceased its White Sands food dispensing services.

It is plaintiff's contention that the activities of defendant's employees were directly essential to the production of goods for interstate commerce, so that its employees were entitled to the benefits of the Fair Labor Standards Act. 29 U.S.C.A. §§ 206-207 (1964), as amended 29 U.S.C.A. §§ 206-207 (1967). Plaintiff seeks wages it claims to be due for the period from February 1, 1967, to June 30, 1967.

Defendant's position is that its White Sands operation was a retail and service establishment within the meaning of §§ 213(a) (2) and (20) of the Act and thus entitled to the retail exemption contained therein. Plaintiff's reply is that defendant's operation lacked the "retail concept" in that it was not open to the general public, so that it at no time was entitled to the retail exemption.

The history of the retail exemption discloses that the definition of a retail or service establishment has remained constant over the years, but that the conditions under which it is available have varied and become restricted.

When first enacted, the Act's retail exemption was not defined by Congress. Congress did, however, in defining the Act's general scope, include activities considered "necessary" to the production of goods for commerce.

The term "necessary" led some courts to find activities covered which Congress had not intended to cover, and in 1949 the word "necessary" was eliminated from the Act. In its place was inserted the "directly essential" test asserted by plaintiff to be applicable to the present case.

In addition, Congress undertook to clarify the retail and service establishment exemption, since some of the activities held to be "necessary" and covered by the Act were in the category it thought to be entitled to the retail exemption. This clarification has persisted without change to the present, so that a retail or service establishment is defined by the statute as one which makes sales or provides services recognized as retail in the particular industry and seventy-five percent of whose annual dollar volume of sales or services is not for resale. If more than fifty percent of such a retail or service establishment's annual dollar volume is made within the state in which it was located, it qualifies for the exemption.

The Act was again amended in 1961, and the scope of the retail exemption was restricted by making the Act applicable to those retail establishments which were part of an enterprise of a certain size. 29 U.S.C.A. § 203(s) (1964). Specific provisions, however, continued the retail exemption for restaurants and food service employees in other retail establishments and exempted any establishment within a covered enterprise, provided that the establishment's annual dollar volume of sales was less than $250,000. Id. § 213(a) (2) (ii), (iv), (20) (1964); 2 U.S.Code Cong. & Ad.News, p. 1647 (87th Cong. 1st Sess. 1961).

The most recent amendments eliminated both the specific exemptions referred to above. Whether a retail exemption is now available to restaurants and other food service employees depends upon whether more than fifty percent of the retail establishment's annual dollar volume of sales is within the state where the establishment is located and (1) the establishment is not part of an enterprise with a volume of gross annual business of $500,000. or more, or (2) the establishment is part of such an enterprise but has an annual dollar volume of sales of less than $250,000. 29 U.S.C.A. §§ 203(s), 213(a) (2) (1964), as amended, 29 U.S.C.A. §§ 203(s), 213(a) (2) (1967).

The 1949 amendment defining a retail and service establishment thus remains unchanged. Any establishment which met its tests in 1949 is still a retail establishment and, provided that it met the other conditions of the 1961 amendment and can meet those of the 1966 amendments, it is entitled to the exemption.

It is not disputed that defendant's White Sands' establishment made no sales for resale. Neither is it disputed that more than fifty percent of its sales were within New Mexico. Nor is it an issue that its sales were of the kind normally recognized as retail in the food service industry. A cafeteria clearly is a restaurant, and, as for the monetary condition imposed by the 1966 amendment, defendant's White Sands operation never approached the $250,000. figure. The "directly essential" test and the retail exemption are mutually exclusive, and if it is not covered by the "directly essential" test, the retail exemption is available to it.

The defendant relies upon what the legislative history shows to be the intent of Congress to overrule the case of McComb v. Factory Stores Co. of Cleveland, 81 F.Supp. 403 (D.Ohio 1948), remanded 179 F.2d 238 (6th Cir. 1949). The legislative history indicates that the Congressional response to the Factory Stores case was the deliberate substitution of the restrictive "directly essential" test for the broad "necessary" test, so as to eliminate from coverage the kind of employees involved in the Factory Stores cafeteria operations and to specifically include within the definition of "retail" the kind of food service establishment therein conducted. 2 U. S.Code Cong.Serv., pp. 2252-2253, 2264 (81st Cong. 1st Sess. 149); see 29 C. F.R. §§ 779.389, .318 (1967).

The defendant in the Factory Stores case operated a cafeteria and canteens under a contract with Republic Steel Corporation on its premises at Cleveland, Ohio. Its cafeteria was open for morning and luncheon service. The plant itself was enclosed by fences, and a company rule prohibited workers from leaving the premises during their working shift. Lunch periods were extremely brief, ranging from fifteen to twenty minutes generally. The plant was located in an industrial section of the city, so that there was insufficient time to travel to the locations where restaurants could be found. The need for in-plant food service to replace or supplement lunch boxes was emphasized, as was the concern of Republic officials with the type of service given and food served by the defendant.

The district court held the cafeteria and canteen employees of the defendant Factory Stores Co. to be engaged in an occupation "necessary for the production of goods" for interstate commerce. McComb v. Factory Stores Co. of Cleveland, supra at 408.

The 1949 amendments caused a remand of the case on appeal. McComb v. Factory Stores...