Wirtz v. Welfare Finance Corporation, Civ. A. No. 838-F.

• Decision Date: 07 January 1967
• Docket Number: Civ. A. No. 838-F.
• Citation: 263 F. Supp. 229
• Court: U.S. District Court — Northern District of West Virginia
• Parties: W. Willard WIRTZ, Secretary of Labor, United States Department of Labor, Plaintiff, v. WELFARE FINANCE CORPORATION, a corporation, Defendant.

263 F. Supp. 229

W. Willard WIRTZ, Secretary of Labor, United States Department of Labor, Plaintiff, v. WELFARE FINANCE CORPORATION, a corporation, Defendant.

Civ. A. No. 838-F.

United States District Court N. D. West Virginia, Fairmont Division.

January 7, 1967.

COPYRIGHT MATERIAL OMITTED

Marne S. Matherne, Nashville, Tenn. (Charles Donahue, Sol., Dept. of Labor, Jeter S. Ray, Regional Atty., Dept. of Labor, and John H. Kamlowsky, U. S. Atty., on brief), for plaintiff.

Herschel Rose, Fairmont, W. Va., Harry M. Wasserman, Cincinnati, Ohio, for defendant.

CHRISTIE, District Judge.

The Secretary of Labor has instituted this civil action against the defendant, Welfare Finance Corporation, to restrain further alleged violations of the minimum wage, overtime compensation and record keeping provisions of the Fair Labor Standards Act of 1938, as amended, 29 U.S.C.A. §§ 201-219 (hereinafter called the Act), and to recover for certain employees any unpaid minimum wage and overtime compensation due them under the Act.

The original complaint asserted traditional coverage as to the employees in question on the basis of their having individually engaged in commerce or in the production of goods for commerce, but leave was granted the Secretary to file an amended complaint setting up the "enterprise" theory, as defined in Sections 3(r),¹ 29 U.S.C.A. § 203(r) and 3(s) (3),² 29 U.S.C.A. § 203(s) (3) of the Act.

GENERAL OPERATION

The defendant is an Ohio corporation with home offices in Cincinnati, Ohio, and is engaged in the installment loan business through a total of 86 branch offices in the states of Ohio, Indiana, Kentucky, Georgia, Illinois and West Virginia. The alleged violations are said to have occurred in the Clarksburg, Weston, Philippi and Grafton, West Virginia branches. No evidence concerning any employee at the Weston branch was introduced at this trial.

During the period of the alleged violations, defendant employed approximately 600 employees, about 77 of whom worked at the home office. The method of operation is highly centralized, the home office furnishing printed forms for records and reports, some of which reports being transmitted daily and some monthly to the home office. The home office also exercises auditing, bookkeeping and payroll supervision over the various branches and from time to time sends operating memos to the various branches for use by the personnel. However, the individual borrower deals exclusively with the local office personnel.

None of the branches in question is shown to have made loans to any persons residing outside the state of West Virginia, nor has any employee in question traveled outside the state of West Virginia in the course of his or her employment. The Clarksburg office manager did state that as a matter of accommodation a local office would accept payment from an individual having a loan at one of the company's other branches or from a person having a loan with another finance company. It was also established that when a customer of one office moved to another state in which defendant had a branch office, a transfer of the account would take place, with the original lending office being paid off in full by the assuming office, although such instances appear to be infrequent.

ENTERPRISE COVERAGE

Defendant has stipulated that during the period in question its annual dollar volume of business was in excess of $1,000,000.00, and while it does not appear that loans as such would fall within the definition of sales contained in Section 3(k),³ 29 U.S.C.A. § 203(k), of the Act, the legislative history of the 1961 amendments is helpful in showing a congressional intention to make the coverage of Section 3(s) (3) dependent upon the size of the business rather than a narrow concept of selling.

Senate Report No. 145, 87 Cong. 1st Sess. (1961), U.S. Code Congressional and Administrative News (1961), page 1624, in part is as follows: "* * * The million dollar test is an economic test. * * * It is a way of saying that anyone who is operating a business of that size in commerce can afford to pay his employees the minimum wage under this law." Of even more significance is a statement in the Senate Report at page 1650 concerning what was to become Section 3(s) (3) of the Act,

"The purpose of this provision is to eliminate fragmentation of coverage in the establishments of these large enterprises and prevent continuance of a situation in which some of the employees in such an establishment have the protection of the act while others who work side by side with them do not. This provision would extend, to employees and employers in large enterprises where present coverage provisions apply, the same uniformity of coverage that is provided by the bill for large enterprises in which the employees are excluded from present coverage.

"This section would provide minimum wage and overtime protection under the act for approximately 100,000 additional employees in such enterprises as wholesale trade, finance, insurance, real estate, transportation, communications, and public utilities, and business, accounting, and similar services."

This indicates a clear intention to include businesses of defendant's nature within the ambit of these new provisions and a court must give them due consideration in an application of the law.

We accordingly conclude that, based upon the agreed stipulations regarding the duties of the branch office manager and the cashier-stenographer as well as the testimony of employees in these two categories, their activities are such as to bring each branch office outside the state of Ohio within the Act's enterprise coverage, thereby subjecting the branch office employees of such branch office, though not actually engaged in commerce or the production of goods for commerce under traditional coverage, to the Act's enterprise coverage requirements. Wirtz v. Wardlaw, 339 F. 2d 785 (4th Cir. 1964).

TRADITIONAL COVERAGE

Whether or not an employee is subject to traditional coverage under the Act is dependent upon his individual activities not the nature of the employer's business, Overstreet v. North Shore Corporation, 318 U.S. 125, 63 S.Ct. 494, 87 L.Ed. 656, and consequently each of the three classes of employees to which violations are alleged to have occurred will be treated separately. However, we deem it advisable to make certain general observations concerning the decided split of authority in the area of the multi-branch consumer finance industry.

In Mitchell v. Household Finance Corp., 208 F.2d 667 (3rd Cir. 1953), it was concluded that employees of a local branch of a small loan company, with duties similar to defendant's employees, were not within the purview of the Act, notwithstanding the fact that the employee's business was interstate and the employees activities were necessary to such business. On the other hand, since this decision three Circuit Courts of Appeals have had cases involving small loan companies and in each instance they have declined to follow Household Finance rationale. Two of these cases, Aetna Finance Co. v. Mitchell, 247 F.2d 190 (1st Cir. 1957) and Mitchell v. Kentucky Finance Co., 359 U.S. 290, 79 S.Ct. 756, 3 L.Ed.2d 815, are clearly distinguishable from the instant case, as well as Household Finance, supra; however, the most recent decision in this area, Beneficial Finance Co. of Wis. v. Wirtz, 346 F.2d 340 (7th Cir. 1965), is very near in point. Notwithstanding Beneficial's considerably larger operation and the fact that it offers its customers a so called "Nationwide Cash Credit Card" that allows an established customer to obtain a loan at Beneficial offices in other states, the actual day to day operation and duties of branch office employees are quite similar to those of Welfare Finance Corp. In refusing to follow Household Finance reasoning, the Court in Beneficial Finance, supra, 346 F.2d page 344, stated that under the standards set forth in Mitchell v. C. W. Vollmer & Co., Inc., 349 U.S. 427, 429,⁴ 75 S.Ct. 860, 862, 99 L.Ed. 1196.

"* * * (T)here is no question but that Beneficial Finance Company and its subsidiaries, including 152 Wisconsin-Beneficial, were engaged in interstate commerce. Obviously, 152 Wisconsin-Beneficial (as well as other subsidiaries) was a participant in such engagement because of the services rendered by its employees. Its activities cannot be isolated on the premise that it is a local activity because (applying the Vollmer test) its work is so directly and vitally related to the functioning of an instrumentality of interstate commerce as to be for all practical purposes a part of it."

While recognizing the broadness of the Vollmer test and the fact that the Act is remedial in nature, we cannot be oblivious to the Court's observations in Mitchell v. H. B. Zachry Co., 362 U.S. 310, 80 S.Ct. 739, 4 L.Ed.2d 753, regarding the limitations in the Act itself, 29 U.S.C.A. § 203(j), as to the necessity of an activity being directly essential to the production of goods for commerce or on the actual production of goods for commerce in order to subject an individual employee to coverage. Considering this in light of an apparent congressional intent to extend the Act's coverage, by use of the enterprise concept, to employees in the finance industry, we decline to hold employees of a branch office of a small loan company which is admittedly engaged in interstate commerce subject to traditional coverage on no other ground than that the work performed by individual employees is necessary. This can be said of any employee regarding his employer's end product or overall operation in the successful conduct of a business. The correctness of this determination in the present situation is reinforced by plaintiff's statement concerning the submission of this matter on the enterprise concept.

INDIVIDUAL EMPLOYEE DUTIES AND ALLEGED VIOLATIONS

(A) Cashier-Stenographer: As already indicated, the duties of defend...