Petition for Writ of Certiorari — Town Pump, Inc. v. Brock
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Supreme Court of the Anited States
OCTOBER TERM, 1984
TOWN PUMP, INCORPORATED, a corporation,
Petitioner,
vs.
RAYMOND J. DONOVAN, Secretary of Labor
United States Department of Labor,
Respondent.
PETITION FOR WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
RICHARD P. SLIVKA
(Counsel of Record)
DAVID L. DAIN
JULI E. LAPIN
BOSWORTH & SLIVKA, P.C.
36 Steele Street, Suite 100
Denver, CO 80206
_ (303) 329-6200
Attorneys for Petitioner
i
\
QUESTIONS PRESENTED FOR REVIEW
I. Did the Ninth Circuit so far depart from the
accepted and usual course of judicial proceedings as to
constitute prejudicial error in its review of the trial court’s
decision?
A. Did the Ninth Circuit act improperly and in
opposition to the position of other circuits
in relying on the trial court’s initial find-
ings of fact and conclusions of law?
B. Did the Ninth Circuit usurp the trial court’s
function and act beyond its authority as an
appellate court?
II. Did the Ninth Circuit’s sweeping reversal of
the trial court’s decision, without considering the
evidence as to each lessee, constitute error?
III. Is the standard for determining employee
status within the meaning of the Fair Labor Standards
Act so inconsistently and unpredictably applied, as
evidenced by the Ninth Circuit’s decision in this case,
that it should be redefined?
iti
TABLE OF CONTENTS
QUESTIONS PRESENTED FOR REVIEW ....
as vont wks sancdsacus cesses
GROUNDS FOR JURISDICTION OF THE
UNITED STATES SUPREME COURT ........
STATUTES INVOLVED....................08
STATEMENT OF THE CASE .................
ARGUMENT FOR ALLOWANCE OF
UE Oe TEI, Sass nie dcccnncccncuas
I. The Ninth Circuit So Far Departed From
The Accepted And Usual Course Of
Judicial Proceedings In Its Review Of
The Trial Court’s Decision That
Prejudicial Error Resulted To Town
DN oh 6 cul ek an bbe be <us Fe bhn oe
A. The Ninth Circuit Acted Improperly
And In Opposition To The Position
Of Other Circuits in Relying On The
Trial Court’s Initial Findings Of
Fact And Conclusions Of Law ....
B. The Ninth Circuit Usurped The
Trial Court’s Function And Acted
Beyond Its Authority As An Appel-
ge ei arate Semele tae
II. The Ninth Circuit’s Sweeping Reversal
Of The Trial Court’s Decision, Without
Considering The Evidence As To Each
Lessee, Constituted Error
Page
10
WV
Il. The Standard For Determining Em-
ployee Status Within The Meaning of the
Fair Labor Standards Act Is So Incon-
sistently And Unpredictably Applied, As
Evidenced By The Ninth Circuit’s
Decision In This Case, That It Should Be
SUNIL « ovccnecaxcacck cba ce. 15
GPE, Gh oe Swine Oo tba ih ide SUCK Tk 21
APPENDIX A
Memorandum Opinion Of The Ninth
MUNI i900 4450440nkebuh Si beabehees on oon. A-l
Final Memorandum And Findings Of Fact
And Conclusions Of Law Of The Trial
So reece ewer ar ee te) ees A-3
Initial Memorandum And Order Of The Trial
RS a he Pep eee ee A-7
Initial Findings Of Fact, Conclusions Of
Law, And Order Of The Trial Court ....... A-11
Order Of The Ninth Circuit ............... A-31
APPENDIX B
Fair Labor Standards Act of 1938
eel Rg a a cap B-1
MP MIE, oc cc cccdccccosséccscctéis en
Eee nN ea? B-1
Tne cubeanh B-1
EE oe on cack os cone hkdbake B-1
cs wa dues B-2
I a B-3
Pe Ad 66 S30) od adi i B-3
SP es eee oil del eas sdieenis. B-4
_
TABLE OF AUTHORITIES
Cases: Page
Aetna Life Insurance Co. v. Board of County Com-
missioners, 79 F. 575 (8th Cir. 1897) ............ 8
Bonnette v. California Health and Welfare
Agency, 704 F.2d 1465 (9th Cir. 1983) .......... 16
Bookman v. United States,
Ge Tie Ga Gee BOUND hd en's vk sentscccden &
Castillo v. Givens,
te § 5 Ge h FEE ere 16
Cleo Syrup v. Coca Cola Co., 139 F.2d 416 (8th Cir.
1943), cert. denied, 321 U.S. 781 (1944) ......... 11
Clinton Engines Corp. v. Briggs & Stratton Corp.,
175 F. Supp. 390 (E.D. Mich. 1959) ............. 8.9
Donovan v. Brandel,
vy BS BIT Se S| eee 16,18
Donovan v. New Floridian Hotel,
y §e © feb fe 3. eee 13
EEOC v. Zippo Manufacturing Co.,
SO ee ED . oo v bea b ede vevaitecces. 19
General Casualty Corp. v. School District No. 5,
233 F.2d 526 (Oth Cir. 19566) .........cccccccesse 11
Gilbreath v. Daniel Funeral Home,
ee Ge, TED cca ccecncdddodscced. 10°
Goldberg v. Whitaker House Cooperative, Inc.,
ED. bn xc snwiinderansdieisd dies 17,18
vi
Gulf Towing Co. v. Steam Tanker,
G68 F.2e BES (Gta Car. GBD) ono. cess ccccccccces i2
Hickey v. Arkla Industries, Inc.,
699 F.2d 748 (Sth Cir. 1983) .................08. 16
In re Rochester Sanitarium and Baths Co.,
Se ee EIR, ED ho viewed weed eee Nee dete S
Indiana State Employees Association v. Negley,
GOl F.Sa TBS (the Cir. 1074) on... cccccscccccccss ll
Kelley v. Everglades Drainage District,
I ED ona cae becom dbeweedvs odes 12
Mednick v. Albert Enterprises, Inc.,
GOS F.98 SOT (Gtha Cir. 1BTE) ow. ce ccc ccc scccsess 13
Meyer v. Missouri State Highway Commission,
567 F.9d 811 (Bth Cir. IDT7) 2.5... ccc ccc cee ecns 10
Mitchell v. Joseph,
Rae Srey CU GA, ORD acc iccncncded vetices 8
Nicholson v. Board of Education,
GBS F.3d GSB (otha Cir. 1GBR) 2... ccc cece ccccccss 12
Paul v. Petroleum Equipment Tools Co.,
708 F.2d 168 (6th Cir. 1983) ................088, 17
Rutherford Food Corp. v. McComb,
et I ac vei ccaaWeeweedeus bWedddaes 15,16
Skidmore v. Swift & Co.,
Be IN Shu wanncdivcicdiweGuGedddas 16
United States v. Benz,
Te EE. wv osu e cuuwanecee bauboeeies &
vii
United States v. Darby,
EEE GE HEED ee cbsreciicccccccescesece
United States v. Jerry,
487 F.2d 600 (3d Cir. 1973) ........... 66.445.
United States v. Rosenwasser,
Se SM OE GOED sive cnccesccccccccccccesece
United States v. United States Gypsum Co.,
8 TR Gg li ly Ee
Walling v. Portland Terminal Co..,
PE ED cis cteseedduccvccccceses
Wynne v. Rocheile,
385 F.2d 789 (Eth Cir. 1967) ..............45.
Yanish v. Barber,
232 F.2d 939 (9th Cir. 1956) .................
Statutes:
Fair Labor Standards Act of 1938
BD CReas ITED 2000s cn cscccccccccces
29 U.S.C. §215(aX(5) ........ 6... eee eee,
PMT scp ceccscccccscnscscss
REET 6 cbGhccecnscccccescecessc
EE a and doc bacaticdencessosne
PP TED 2. nc cnecesccseseseacesegee
Rules:
Rule 52(a) of the Federal Rules of Civil
EES
nee 16
12
l
3n the
Supreme Court of the Anited States
TOWN PUMP, INCORPORATED, a corporation,
RAYMOND J. DONOVAN, Secretary of Labor,
United States Department of Labor,
Respondent.
PETITION FOR WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
OPINIONS BELOW
On October 6, 1981, the United States District Court for
the District of Montana, Butte Division, Judge W. D.
Murray, issued a Memorandum and Order and Findings
of Fact, Conclusions of Law and Order. Case No.
CV-78-31-BU.
On September 28, 1983, the United States District
Court for the District of Montana, Butte Division, Judge
W. D. Murray, issued a Memorandum and Findings of
Fact and Conclusions of Law. Case No. CV-78-31-BU.
On August 27, 1984, the United States Court of Appeals
for the Ninth Circuit issued a Memorandum Opinion.
Case No. 83-4313.
2
These opinions were not designated for publication in
either official or unofficial reporters.
GROUNDS FOR JURISDICTION OF THE
UNITED STATES SUPREME COURT
The judgment of the Ninth Circuit Court of Appeals
was filed and entered on August 27, 1984. On November
23, 1984, Defendant-Appellee Town Pump, Inc.’s timely
petition for rehearing was denied by the Ninth Circuit,
and this petition for certiorari was filed within ninety
days of that date pursuant to Rules 17 and 20 of this
Court. The jurisdiction of this Court is invoked under 28
U.S.C. §§1254(1) and 2101(c).
STATUTES INVOLVED
The pertinent text of the Fair Labor Standards Act of
1938, 29 U.S.C. §§201-219 is set forth in Appendix B.
STATEMENT OF THE CASE
Town Pump, Inc. is a Montana corporation which is
engaged in, among other things, the wholesale and retail
distribution of petroleum products. Throughout this case
the designation “Town Pump” has been used to identify
not only this corporation, but numerous corporations and
entities owned by various members of the Thomas F.
Kenneally family of Butte, Montana. For simplicity’s
sake, “Town Pump” will be used to refer to the defendant
corporation and any related entities engaged in the con-
duct which is the subject of this lawsuit.
The United States Department of Labor (“DOL”)
brought this suit pursuant to §17 of the Fair Labor
Standards Act of 1938 (“FLSA”), 29 U.S.C. §217, to enjoin
Town Pump from violating §§15(a)(2) and 15(a)(5) of the
FLSA, 29 U.S.C. §§215(a)(2) and 215(a)(5), and to recover
3
unpaid minimum wages and overtime compensation for
certain individuals who had enterea into leases with
Town Pump over the years. The district court had juris-
diction over the action pursuant to 29 U.S.C. §§216(c) and
217 and 28 U.S.C. §§1291 and 1345.
Town Pump, in its petroleum products business, was
associated with approximately 50 different retail
locations in the State of Montana. The nature of Town
Pump’s association with these retail locations varied
over time and location. Over the years, retail marketing
concepts regarding petroleum products have experienced
considerable change, some of which affected the opera-
tions at issue. Self-service gasoline operations were con-
verted into convenience stores or other businesses which
also sold petroleum products at retail.
During the years in question, 1977 to 1982, Town Pump
sold petroleum products at retail through its own store
operations and also to and through lessee-operated retail
businesses. Only the lessee-operated enterprises have
been at issue in the lawsuit. In addition to selling
petroleum products a* retail, lessees engaged in busi-
nesses which varied « »nsiderably over the time period
involved according to the facilities present and the
interests of the lessees. Town Pump had no interest or
investment in any of these bucinesses, other than to lease
the premises and provide petroleum products for resale.
The lessees earned profits from their businesses and were
paid commissions from Town Pump for sales of
petroleum products through the self-service pumps.
The DOL investigation covered a two-week period in
April of 1977 during which it visited 16 locations. The
Internal Revenue Service had previously conducted an
extensive investigation into the nature of Town Pump’s
association with its lessees to determine whether a
lessor/lessee relationship or an employer/employee
relationship existed, and concluded that Town Pump was
4
not an employer of these individuals but that they were
lesse. | of Town Pump. After its investigation, the DOL
initially determined that, based on substantial invest-
ments in the store operations, two locations were
operated by independent contractors. All other lessees
were determined to be employees of Town Pump, regard-
less of the nature and extent of their businesses. Later the
DOL agreed that another location was not operated by an
employee but rather by an independent contractor.
The DOL filed the lawsuit in May of 1978. During the
first trial in June of 1980, the DOL called two lessee
witnesses and put in deposition testimony of four others.
Town Pump was later allowed to submit the deposition
testimony of three officers. In October of 1981, Judge
Murray, the trial judge, made findings of fact and con-
clusions of law ' and held that the six individual lessees
involved in that trial were employees within the meaning
of the FLSA. He further held that there was insufficient
_evidence to conclude that any lessees who had not
testified were employees.’
In September of 1982 a second trial was held during
which 51 lessees testified, some called by the DOL and
some by Town Pump. Town Pump also put on testimony
of management employees and expert witnesses. The
DOL was seeking recovery for the lessees it called to
testify as well as for all non-testifying lessees of approxi-
mately $2,000,000.00 in actual damages and
$2,000,000.00 in liquidated damages. At this trial Judge
Murray re-examined the findings as to the first six
lessees in light of all the testimony and evidence pre-
sented at the two trials.
‘Donovan v. Town Pump, Inc., No. CV-78-31-BU (D. Mont. 1981)
Findings of Fact, Conclusions of Law and Order (fully set forth in
Appendix A hereto) (hereinafter referred to as Initial Opinion).
*Donovan v. Town Pump, Inc., No. CV-78-31-BU (D. Mont. 1981)
(mem.) (fully set forth in Appendix A hereto) (hereinafter referred to as
Initial Opinion).
5
On September 28, 1983, Judge Murray issued a final
opinion and order in which he found that each of the
lessees who testified (including the initial six) were
independent contractors and not employees within the
meaning of the FLSA.° His opinion contained several
specific factual findings, including determinations of
credibility of witnesses, and legal conclusions, which
were in direct opposition to the findings and conclusions
of the Initial Opinion. Judge Murray addressed certain,
but not all, of the six factors enumerated in prior cases by
the Ninth Circuit as being relevant to a determination of
an individual’s employment status under the FLSA.
On appeal the DOL did not allege that the factual
findings of the trial court were clearly erroneous; instead,
it essentially disregarded those findings and argued
facts to the contrary. The DOL’s position was that the
district court misapplied the established legal test and
did not consider all of the appropriate factors.
In its memorandum opinion, the Ninth Circuit agreed
_ with the DOL that the trial judge failed to consider
significant factors in determining the lessees’ status.‘
The circuit court noted that such a case would normally
be appropriate for remand for further findings of fact. in
this instance, however, the appellate court chose not to
remand, and did not deal with Judge Murray’s findings
of fact and conclusions of law rendered after the second
trial. It relied on the initial findings of fact and conclu-
sions of law which the trial judge had explicitly limited to
six individuals, and which the trial judge later reversed,
as the basis for ruling on all lessees who testified.
3Donovan v. Town Pump, Inc., No. CV-78-31-BU (D. Mont. 1983)
(mem.) (fully set forth in Appendix A hereto) (hereinafter referred to as
Final Opinion).
‘Donovan v. Town Pump, Inc., No. CV 78-0031 (9th Cir. 1984)
(mem.) (fully set forth in Appendix A hereto) (hereinafter referred to as
Ninth Circuit Opinion).
6
The Ninth Circuit held that all 57 lessees were
employees of Town Pump within the meaning of the
FLSA. It did not reconcile or account for the differences
in the findings of fact made by Judge Murray after the
two trials, nor did it explain why the findings of fact
made after the second trial shou!d not control. The Ninth
Circuit did not state that it reviewed the voluminous
record of testimony and documentation presented to the
trial court in reaching its decision, nor did it address the
trial testimony that showed significant variations in the
nature of the business operations. In its opinion, the
appellate court merely stated that “the district court’s
detailed findings of fact, made after the first trial, are
sufficient for us to rule on the issue.’
Town Pump filed a timely petition for rehearing in the
Ninth Circuit, arguing that the appellate court’s reliance
on the trial court’s first order was error. Town Pump also
argued that the Ninth Circuit improperly disregarded the
factual bases of the district court’s second order and
should have reviewed those facts by the clearly erroneous
standard. The DOL filed a brief in opposition to the
petition for rehearing taking a position different from
that in its appellate brief. In its appellate brief the DOL
argued that the district court totally reversed itself in its
second opinion, thereby acknowledging that the findings
and conclusions in the Final Opinion were in direct
contradiction to certain of those in the Initial Opinion. In
its brief in opposition to rehearing, however, the DOL
elected to climb aboard with the Ninth Circuit and
asserted that the court had not set aside its Initial
Opinion and that the original findings and conclusions
remained legally viable. Without comment, the Ninth
Circuit denied the petition for rehearing.
This case illustrates the remarkable result of an
appellate court’s disregard for the usual course of judicial
proceedings, and it demonstrates the need for a clarifi-
‘Ninth Circuit Opinion at A-2.
7
cation of the standards under the FLSA. The findings of
fact and conclusions of law made by a trial court after
thorough consideration of evidence presented during
twelve days of trial were rejected by the Ninth Circuit
without any regard whatsoever. The original findings
and conclusions which were superseded by the trial
court’s Final Opinion were adopted by the Ninth Circuit
to apply to individuals who were not before the trial court
at the first trial and whose business activities differed
significantly from the initial six lessee witnesses.
ARGUMENT FOR ALLOWANCE OF
WRIT OF CERTIORARI
I. The Ninth Circuit so far departed from the
accepted and usual course of judicial proceed-
ings in its review of the trial court’s decision
that prejudicial error resulted to Town Pump.
A. The Ninth Circuit acted improperly and
in opposition to the position of other
circuits in relying on the trial court’s
initial findings of facts and conclusions
of law.
By essentially disregarding the findings in the trial
court’s Final Opinion and relying on the original
findings of fact as the basis upon which to justify its
holding, the Ninth Circuit gave effect to a nullity. Such
action by an appellate court is totally without support-
ing authority and contrary to the position of other
circuits. Moreover, because the DOL did not formally
contest the trial court’s final findings on appeal, nor
argue that the initial findings should apply, the Ninth
Circuit acted outside the scope of its appellate authority
in disregarding the final findings and adopting the
initial ones.
The rule is well established that a court has inherent
power to amend, modify, or vacate an order, decree, or
8
judgment which it previously entered.* Reconsideration
of a prior decision is often the sole means of correcting
errors of procedure or substance, for example, where a
new development or newly discovered evidence comes to
light.” Where a court exercises this power, the prior status
of the case is restored and the situation is the same as if
the order or judgment had never been entered.* The order
becomes a nullity, no rights can be considered as
accruing from it, and findings of fact not included in the
final findings or judgment cease to be part of the final
order.°
Judge Murray exercised his authority to reconsider a
prior decision when, after the second trial session, he re-
examined the findings from the first session. In light of
the comprehensive evidence presented by both sides at
the second session, Judge Murray made totally new
findings of fact which contradicted the findings of the
Initial Opinion. For example, after the first trial the court
found that Town Pump had complete control over every
significant aspect of the business, and after the second
trial the court found that Town Pump did not supervise
the lessees or control the hours of operation. Judge
Murray concluded after the second trial that none of the
Town Pump lessees could be classified as employees
within the meaning of the FLSA. Upon the entry of the
6United States v. Benz, 282 U.S. 304, 306-307 (1931); Bookman v.
United States, 453 F.2d 1263, 1265 (Ct. Cl. 1972); Mitchell v. Joseph,
117 F.2d 253, 255 (7th Cir. 1941); In re Rochester Sanitarium & Baths
Co., 222 F. 22, 26 (2d Cir. 1915); Aetna Life Ins. Co. v. Board of County
Commissioners, 79 F. 575, 576 (8th Cir. 1897).
7Bookman, 453 F. 2d at 1265.
8Wynne v. Rochelle, 385 F.2d 789, 796 (5th Cir. 1967); In re
Rochester Sanitarium, 222 F. at 26; Aetna, 79 F. at 576.
®See United States v. Jerry, 487 F.2d 600, 607 (3d Cir. 1973); Clinton
Engines Corp. v. Briggs & Stratton Corp., 175 F. Supp. 390, 391 (E.D.
Mich. 1959).
9
final judgment, the initial findings of fact and conclu-
sions of law ceased to exist.'°
It is clear that Judge Murray acted properly: the addi-
tional evidence with which he was presented during the
second trial provided him with a much more accurate
picture of the lessees’ situation than did the one-sided
testimony of the first trial. Deference should have been
accorded the trial judge’s desire to reach the right result,
a result which meant reversal of his earlier decision after
consideration of additional evidence.
In its appeal to the Ninth Circuit, the DOL did not in
any way suggest that Judge Murray’s initial opinion
should be revived or that it could be used to support a
determination that all lessees at issue were employees of
Town Pump. Moreover, it did not contest the findings of
fact in the Final Opinion, but essentially ignored them.
The Ninth Circuit also treated those findings in the Final
Opinion as if they had no effect and then stepped beyond
its appellate authority. Of its own accord, the Ninth
Circuit used the trial court’s initial findings of fact to
support its holding that the Town Pump lessees were
FLSA employees. Such an act is in direct opposition to
the positions of the Second, Third, Fifth, Seventh, and
Eighth Circuits, is a prejudicial departure from the ac-
cepted and usual course of judicial proceedings, and
should be examined by this Court.
Clinton Engines Corp., 175 F. Supp. at 391.
10
B. The Ninth Circuit usurped the trial
court’s function and acted beyond its
authority as an appellate court.
1. The validity of factual findings was
not an issue properly before the
Ninth Circuit, and any review of
factual findings which did take place
should have been conducted with the
appropriate degree of scrutiny.
By setting aside the findings of the trial court’s final
decision without having been asked to consider factual
findings on appeal, and where underlying facts had been
in dispute, the Ninth Circuit in effect conducted a de novo
trial in contravention of basic principles of appellate
review. Not only is a higher court limited to reviewing the
issues raised, but it may not resolve factual contro-
versies'' nor may it set aside findings of fact in actions
tried to the court unless it determines the findings to be
clearly erroneous. '?
A finding is clearly erroneous “when although there is
evidence to support it, the reviewing court on the entire
evidence is left with a definite and firm conviction that a
mistake has been committed.”'® It is beyond the
authority of the court of appeals to re-evaluate evidence
presented to the trial court, and the reviewing court may
not substitute its judgment for first-hand evaluation. '‘
'\Gilbreath v. Daniel Funeral Home, 421 F.2d 504, 510 (8th Cir.
1970).
'2Rule 52(a) of the Federal Rules of Civil Procedure.
'8United States v. United States Gypsum Co., 333 U.S. 364, 395
(1948).
'*Meyer v. Missouri State Highway Comm'n, 567 F.2d 804,811 (8th
Cir. 1977) (Matthes, J., concurring in part and dissenting in part).
11
Full effect must be given to a trial judge’s opportunity,
which is denied to courts of appeals, to observe witnesses,
judge their credibility, and draw inferences from their
testimony.'® In determining whether a sufficient eviden-
tiary basis exists for the court’s findings of fact, the
appellate court must view the evidence and the inferences
deductible therefrom in the light most favorable to the
appellee. '®
The Ninth Circuit should have limited its review to a
determination of whether the trial court misapplied the
law in concluding that Town Pump lessees were
independent contractors. It did not do so. Moreover, in
not dealing with the findings in the Final Opinion, the
circuit court did not examine the trial court’s findings in a
light most favorable to Town Pump; it did not show
deference to the court’s determination of credibility of
witnesses; it did not presume the trial court's findings to
be correct; and it did not limit its role to determining
whether the DOL had rebutted that presumption.
Instead, the Ninth Circuit relied on those findings, which
originally had been adopted by the trial court from those
proposed by the DOL, but which were later rejected by
Judge Murray. In so doing, the Ninth Circuit resolved
factual controversies in total disregard of the limits of its
appellate authority.
'°333 U.S. at 394; General Casualty Co. v. School Dist. No. 5, 233
F.2d 526, 528 (9th Cir. 1956).
'*Cleo Syrup Corp. v. Coca Cola Co., 139 F.2d 416, 417-18 (8th Cir.
1943), cert. denied, 321 U.S. 781 (1944); Indiana State Employees Ass'n
v. Negley, 501 F.2d 1239, 1242 (7th Cir. 1974).
12
2. If the findings of fact in the trial
court’s final opinion were insuffi-
cient for proper review, the Ninth
Circuit should have remanded the
case for further findings.
The test as to the adequacy of a trial court’s findings of
fact is whether they are explicit enough on the ultimate
issues to give the appellate court a clear understanding of
the basis of the decision and to enable it to determine the
grounds on which the trial court reached its decision.'’ A
remand for appropriate findings is the normal procedure
where a trial court has not fulfilled its duty under Rule
52(a) of the Federal Rules of Civil Procedure. '* It is not the
function of the appellate court to make findings of fact,
nor should the reviewing court examine the evidence as
an original fact finding tribunal.'® An exception to the
general rule requiring a remand for lack of findings
arises where the record considered as a whole does not
present a genuine issue as to any material fact.
The Ninth Circuit stated that a case such as this would
generally be remanded for further fact findings,”°
indicating that it did not clearly understand the basis of
the trial court’s decision. The witnesses’ testimony and
Judge Murray’s findings with regard to credibility show
that many facts were in dispute and that the exception to
the rule requiring remand was not applicable. Rather
than sending the case back, the Ninth Circuit relied on
factual findings which had been superseded by the trial
court’s Final Opinion. Such an action was equivalent to
"Kelley v. Everglades Drainage Dist., 319 U.S. 415, 422 (1943),
Nicholson v Board of Educ., 682 F.2d 858, 866 (9th Cir. 1982).
"Gulf Towing Co. v. Steam Tanker, 648 F.2d 242, 245 (5th Cir.
1981).
'*Yanish v. Barber, 232 F.2d 939, 946-47 (9th Cir. 1956).
*Ninth Circuit Opinion at A-2.
13
acting as an original fact finding tribunal. It constitutes
a departure from the usual course of judicial proceedings,
causing prejudice to Town Pump and warranting review
by this Court.
Il. The Ninth Circuit’s Sweeping Reversal Of
The Trial Court’s Decision, Without Con-
sidering The Evidence As to Each Lessee,
Constituted Error.
The Ninth Circuit’s decision to ignore all testimony
and evidence introduced at the second trial and to rule on
the status of all testifying lessees without looking at the
evidence as to each individual conflicts with the law in
other circuits.?' Moreover, this error cannot be considered
harmless. A review of the testimony of certain lessees
clearly establishes that the Ninth Circuit's classification
of these individuals as employees based solely on the trial
court’s Initial Opinion as to six lessees was clearly in
error.
A glaring example of this error is shown in Mr. Earnest
Franke’s testimony at the trial in September of 1982. His
uncontradicted testimony established that the premises
he leased from Town Pump consisted of approximately
half a city block containing three separate buildings and
three islands tur gasoline pumps. Mr. Franke maintained
over $30,000.00 in inventory including groceries and
automotive and sporting goods. At the time of trial he
was in the process of installing an ice cream parlor, a
video arcade and a tool rental and sales business.
Although Mr. Franke entered into the written lease
*' See, eg., Donovan v. New Floridian Hotel, 676 F 2d 468, 471 (11th
Cir. 1982) (existence of employment relationship must be judged by
economic realities of individual case); Mednick vu. Albert Enterprises,
Inc., 508 F 2d 297, 302 n.6 (5th Cir. 1975) (test of economic reality goes
to question of whether individual whose status is in question was in
fact an independent businessman).
14
agreement with Town Pump, he purchased the business
amount for inventory as well as an amount in excess of
$10,000.00 for the good will of the business. Mr. Franke
also testified that he set his own hours of operation and
hired employees at his own expense.
In addition to Mr. Franke’s testimony, other iessees
testified that they engaged in substantial businesses on
the leased premises other than the sale of gasoline and
that they did not share the profits from their businesses
with Town Pump. Lessees engaged in such substantial
and varied businesses as selling used cars, selling marine
supplies, and providing surveying and trv -king services,
in addition to the sale of grocery and relaced store items.
Town Pump was not involved in any of these
independent ventures.
The district court heard the testimony and reviewed
the documents pertaining to each individual before deter-
mining that individual's status under the FLSA. On the
other hand, the Ninth Circuit failed to examine and
comment upon the evidence in rendering its decision and
merely relied on the findings with regard to the original
six lessees to reverse the trial court. The circuit court's
decision resulted in the granting of employment status to
individuals not dependent for their livelihoods upon
Town Pump. These improper classifications were
achieved by the Ninth Circuit's sweeping reversal of the
trial court’s decision without proper consideration of the
evidence as to each lessee, resulting in error.
By examining the evidence at the two sessions of trial,
the district court made factual determinations which led
to a classification by the lessees as independent con-
tractors. At no time has the DOL argued nor has the
Ninth Circuit held that those findings of fact were clearly
erroneous and therefore not binding on the determina-
tion of employment status. This court should therefore
15
remand this case to the Ninth Circuit with instructions to
reinstate the trial court's final decision.
Ill. The Standard For Determining Employee
Status Within The Meaning of the Fair Labor
Standards Act Is So Inconsistently And
Unpredictably Applied, As Evidenced By The
Ninth Circuit's Decision In This Case, That It
Should Be Redefined.
Employment status under the FLSA is a concept which
has continually provoked dispute since the enactment of
the statute and which has never lent itself to a precise
test. In practice, the definition set forth by this Court
nearly 40 years ago in Rutherford Food Corp. v.
McComb,” provides little assistance to courts examining
established relationships to determine whether a person
is an employee under the FLSA, and almost no guidance
or predictability to individuals or businesses about to
engage in a relationship as to whether the FLSA applies.
The FLSA was enacted as part of the social legislation
of the 1930s “to protect this nation from the evils and
dangers resulting from wages too low to buy the bare
necessities of life and from long hours of work injurious to
health.”?" Protection of interstate commerce was also a
concern, and, through the Act, Congress sought to sup-
press “nationwide competition in interstate commerce by
goods produced under substandard labor conditions."**
331 U.S. 722, 730 (1947) (the determination of the relationship
depends upon the circumstances of the whole activity).
“United States v. Rosenwasser, 323 U.S. 360, 361 (1945) (quoting
S. Rep. No. 884, 75th Cong., Ist Sess. 4 (1937) ).
“United States v. Darby, 312 U.S. 100, 123 (1941).
16
In its first opinions construing the various acts of
social legislation, however, this Court made clear that it
was never the intent of Congress “to impose an errange-
ment upon the parties,”’?° nor to include those “who,
without any express or implied compensation agreement,
might work for their own advantage on the premises of
another.’’?° Rather the laws impose “upon the courts the
task of finding out what the arrangement was.’’?’
Since the Rutherford decision, courts have identified
factors to help in distinguishing employees from
independent contractors, but it is clear that the presence
or absence of a single factor is not dispositive, and certain
factors may be more important in one situation than in
another.2® Moreover, it is not necessary that findings be
made with regard to each of the factors in order to deter-
mine the existence of an employment relationship.”°
At the outset, it is the trial court’s responsibility to
examine the evidence and make factual findings, and
then to make a decision of whether as a matter of
economic reality the individuals being considered are
dependert upon the business of another. Several circuit
courts have held that the ultimate determination of
employment status is a legal one.*° In principle, there is
25Skidmore v. Swift & Co., 323 U.S. 134, 137 (1944).
26Rutherford, 321 U.S. at 728-29 (quoting Walling v. Portland
Terminal Co., 330 U.S. 148, 152 (1947) ).
27Skidmore, 323 U.S. at 137.
28Hickey V. Arkla Indus., Inc., 699 F.2d 748, 751-52 (5th Cir. 1983)
(degree of control; opportunities for profit or loss; investment in
facilities; permanency of relationship; ard skill required).
29Id. at 752.
3° See, e.g., Donovan v. Brandel, 736 F.2d 1114, 1116 (6th Cir. 1984);
Bonnette v. California Health & Welfare Agency, 704 F.2d 1465, 1469
(9th Cir. 1983); Castillo v. Givens, 704 F.2d 181, 187 n. 12 (5th Cir.
1983).
17
no disagreement that subsidiary facts underlying that
determination are subject to the clearly erroneous
standard on review,*! and appellate courts are bound by a
trial court’s findings with regard tothe particular factors
related to employment status unless they are left with the
distinct and compelling impression that a mistake has
been made.*? In practice, however, appellate courts have
not always abided by this procedure.
It is clear that the determination of employment status
under the FLSA rests upon factual findings made on a
case-by-case basis. By holding that the ultimate deter-
mination is a legal one the role of the appellate courts has
become confused, and the DOL has been able to dis-
regard adverse factual findings in seeking relief on
review. This case demonstrates the error that may result
when the appellate court does not subject the trial court’s
findings to the clearly erroneous standard and treats the
issue of employment status solely as a matter of law. By
defining the issue on appeal as merely a legal one the
DOL avoided the burden of proving that the trial court’s
findings were not substantially justified, and the Ninth
-Circuit was able to disregard the trial court’s Final
Opinion in making its holding. This result undermines
the established principles requiring deference to the role
of the trier of fact.
This Court has not explicitly stated whether the deter-
mination of employment status is a legal one. In
Goldberg v. Whitaker House Cooperative,** where this
Court most recently dealt with the issue of employment
3! Paul v. Petroleum Equipment Tools Co., 708 F.2d 168, 170 (5th Cir.
1983).
32United States v. United States Gypsum Co., 333 U.S. 364, 395
(1948).
33366 U.S. 28 (1961).
18
status, the decision was split 5-3 that certain individuals
were employees. The majority did not state that its deter-
mination was a legal one, but relied upon the homework
provision in the Act to conclude that the cooperative
members were covered. The dissenting justices argued
that the finding of the district court, that the cooperative
was created and being operated as a true cooperative,
must be accepted by the Court unless it was clearly
erroneous.*‘ Because the majority was able to rely on a
particular amendment to the FLSA to find employment
status, the issue of what standard is correct in making
and reviewing a determination of employment status has
not actually been decided by the Court.
A comparison of a recent Sixth Circuit decision with
the Ninth Circuit decision in this case* illustrates that
the issues of the applicable standard for employment
status and the manner in which the factors are applied
are far from settled. In Donovan v. Brandel,** the Sixth
Circuit emphasized that the inquiry of whether workers
are employees subject to the FiSA must be made on a
case-by-case basis, with a thorough examination of the
unique factual record of the particular case. Although the
DOL did not challenge factual findings on review, the
Sixth Circuit examined those findings and determined
that the record supported them with regard to each of the
factors considered. As required by Rule 52(a) of the
Federal Rules of Civil Procedure, the appellate court
treated the findings as binding unless clearly erroneous.
34366 U.S. at 33 (Whittaker, J. with Brennan, J. and Stewart, J.
dissenting).
Although the Ninth Circuit ordered that the disposition of the
present case be by memorandum, foregoing publication, it still must
be considered the law of the Ninth Circuit. See Ninth Circuit Opinion
at A-2.
96736 F.2d 1114 (6th Cir. 1984).
19
In concluding that, based upon the record and the court’s
factual findings, the workers were not economically
dependent upon the landowner’s business, the Sixth
Circuit rejected the DOL’s attempt to seek a per se rule
that all migrant farm workers are employees subject to
the FLSA.
Unlike the Sixth Circuit, the Ninth Circuit proceeded
in this case without due regard to the factual findings of
the trial court’s Final Opinion. Instead of going back to
the comprehensive record to determine whether the
findings were clearly erroneous, the Ninth Circuit dis-
regarded the diversity of business enterprises engaged in
by the lessees, ignored the agreement between the
parties, and in effect made factual findings de novo. In
holding that the lessees at issue were employees, the
Ninth Circuit cited other cases involving self-service
gasoline stations, indicating that it was giving effect to
the DOL’s attempt to make a per se rule that all self-
service gasoline operators are employees subject to the
FLSA.
Further, a comparison of the decisions made by the
Sixth and Ninth Circuits illustrates the absence of
universal qualities in defining and identifying the status
of individuals under the FLSA. The same person could be
performing the same act at the same time under thesame
conditions and be considered an employee in one circuit
and not in another. This possibility breeds ambiguity
and confusion.?? This Court should therefore provide
guidance as to what factors should be considered and
how they should be applied in determining whether an
employment relationship exists within the meaning of
the FLSA.
87Cf. EEOC v. Zippo Mfg. Co., 713 F.2d 32 (3d Cir. 1983) (T hird
Circuit discusses difficult task facing courts in attempting to
determine employee status for purposes of various federal statutes).
20
Town Pump maintains that the question of employ-
ment status is primarily a factual determination and
must be treated as such by reviewing courts. Ifthe issue is
regarded as a legal one, the role of the trial court will
continue to be usurped by appellate courts’ disregard for
the factual determinations of the trier of fact.
The issues in this case are important not only to Town
Pump but to other businesses in the retail petroleum
products business. This industry has undergone
substantial changes in its marketing concepts, moving
from traditional company operated gasoline stations to
self-service pumps associated with convenience stores or
other business enterprises. These changes have necessi-
tated the establishment of new business relationships.
As the courts have articulated and applied the various
factors relevant toemployment status, there is no way for
private citizens to predict at the outset of a relationship
whether it will be subject to the FLSA. Citizens may not
rely on determinations of other federal agencies, and the
courts themselves do not agree on the manner in which
the standards are to be applied in determining employ-
ment status. The appellate courts are venturing further
and further into the realm of the trial court and the facts
of a particular case have become less and less significant.
21.
CONCLUSION
For the foregoing reasons, this Court should issue a
writ of certiorari to review the judgment and opinion of
the Ninth Circuit.
Respectfully submitted,
RICHARD P. SLIVKA
DAVID L. DAIN
JULI E. LAPIN
BOSWORTH & SLIVKA, P.C.
36 Steele Street, Suite 100
Denver, CO 80206
(303) 399-6200
Attorneys for Petitioner
APPENDIX A
A-1l
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
RAYMOND J. DONOVAN,
Secretary of Labor, United
States Department of Labor,
— ee ee eee ee
Plaintiff-Appellant, CA No. 83-4313
vs. DC No. CV 78-0031
TOWN PUMP, INCORPORATED, MEMORANDUM*
& corporation,
Defendant-Appellee.
— —— —
Appeal from the United States District Court
for the District of Montana
William D. Murray, District Judge, Presiding
Argued and submitted August 10, 1984
Filed August 27, 1984
Before: PECK, WRIGHT and FARRIS, Circuit Judges.
We agree with the Secretary of Labor that the district
court erred in failing to consider significant factors in its
determination that the operators are not employees
under the Fair Labor Standards Act, 29 U.S.C. §§ 201 et
seq. See Real v. Driscoll Strawberry Associates, 603 F.2d
748, 754 (9th Cir. 1979).
The district court relied on Town Pump’s lack of
supervision of the operators and the fact that the
operators were free to engage in other business at the
A-2
stations. Whether an employer-employee relationship
exists depends “upon the circumstances of the whole
activity.” Rutherford Food Corp. v. McComb, 331 U.S.
722, 730 (1947) (emphasis added). The employer's degree
of control over business operations is not conclusive in
determinations of employment status under the FLSA.
Usery v. Pilgrim Equipment Co., 527 F.2d 1308, 1311 (5th
Cir.), cert. denied, 429 U.S. 826 (1976). Neither is the fact
that the operators are free to engage in other businesses.
“{Tyhe test is not what the ‘agent’ could do but in fact
what the ‘agent’ does do.” Donovan v. Sureway Cleaners,
656 F.2d 1368, 1371 (9th Cir. 1981) (quotation omitted).
Generally we would remand the case for further fact
findings on the factors ignored by the district court. See
Driscoll. We find it unnecessary to do so here, however,
because the district court's detailed findings of fact, made
after the first trial, are sufficient for us to rule on the
issue. The court found that the operators have no invest-
ment in the gasoline business, that the operators remain
on the job as long as they continue to meet the require-
ments set by Town Pump, that the operators’ retail sale of
gasoline is an integrated part of Town Pump’s business,
and that the operators are dependent upon Town Pump
for continued employment.
The record is sufficient for us te hold that the
operators considered by the district court are employees.
See e.g., Marshall v. Trumaa Arnold Distributing Co.,
640 F.2d 906 (8th Cir. 1981); Donovan v. Williams Oil Co.,
717 F.2d 503 (10th Cir. 1983).
The judgment of the district court is remanded for a
determination of the extent of the violations and
damages.
REVERSED and REMANDED.
*The panel has concluded that the issues presented by this appeal do
not meet the standards set by Rule 21 of the Rules of this Court for
disposition by written opinion. Accordingly, it is ordered that
disposition be by memorandum, forgoing [sic] publication in the
Federal Reporter, and that this memorandum may not be cited in or by
the courts of this circuit.
A-3
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MONTANA
BUTTE DIVISION
RAYMOND J. DONOVAN,
Secretary of Labor, United
States Department of Labor.
Plaintiff,
MEMORANDUM
and
FINDINGS OF FACT
and
CONCLUSIONS
OF LAW
vs.
TOWN PUMP, INCORPORATED,
A Corporation, NO. CV—78-31-BU
— ee ee ee eee eee eee ee
Defendant.
This is an action for a permanent injunction, back
wages, and liquidated damages brought by the Depart-
ment of Labor (DOL).
The case first came on for trial on June 17, 1980. DOL
presented testimony and depositions of six witnesses
regarding their employment status. The defendant did
not present any testimony and the court found that the
six were employees under the Fair Labor Standards Act
of 1938, and ordered DOL to submit calculations of hours
worked and wage and overtime amounts owed within 30
days of the order.
The DOL failed to submit such calculations until the
case came on for further trial in September, 1982.
A-4
The court having considered all the evidence and
testimony submitted at the two sessions of the trial of the
case and the briefs of counsel, and being fully advised in
the premises, now makes the follow'~g Findings of Fact
and Conclusions of Law.
As a result of all the testimony and evidence pre-
sented to the court the findings of the court with reference
to the first six witnesses will be re-examined.
That re-examination together with a review of all the
testimony and evidence leads the court to conclude that
the plaintiff has failed to sustain its burden of proving
that the operators of the stations were employees. On the
contrary the court finds that the relationship between the
operators and the defendant was that of independent
contractors.
The testimony of the operators that the defendant
required them to be open and servicing the public
approximately 15 hours a day seven days a week is not
credible. The operators in the main had to admit that
representatives of the defendant only seldomly visited
the stations and there was no evidence that they other-
wise checked on the hours of operation. On the other
hand there was testimony from some of the operators
that the defendant only recommended what hours to keep
open. And this testimony was supported by that of the
officers and representatives of the defendant. If the
defendant required the stations to be open 15 hours a day
s rely there would be constant checks on the hours of
operation.
Aside from the question of hours to keep open there
was no evidence of supervision of the operators that
would be the natural and regular system in an employer-
ne ene
The operators were free to and, in fact, encouraged to
engage in additional businesses at the stations. These
business activities varied and there is no evidence that
defendant in any way attempted to control them or to
participate in the profits of such activities.
Plaintiff makes much of the defendant's requiring
A-5
the operators to deposit proceeds and payment for gas
purchased to defendant's account but this, it seems to the
court, is quite reasonable and compatible to th»
independent contractor relationship in view of the credit
extended by defendant to the operators. This was not
such control as to indicate an employer-empleyee
relationship.
In connection with the question of the relationship
between the parties the existence of the lease and lease
letter must be considered. While it is true that the intent of
the law cannot be evaded by a sham, here we have
documents which announce a relationship and which is
compatible with all the: her credible evidence establish-
ing an independent coniractor relationship.
Under the terms of the lease many operators
engaged in substantial other business. That some did not
does not detract from the fact that the opportunity was
there. And even the government recognized that some of
the operators were of such a nature as to establish the
independent contractor relationship. The operators con-
ducted various businesses in conjunction with .he gas
stations. These businesses were as varied as grocery,
candy and pop to used car-sales lots, fly-tying and a
surveyor’s office. One operator ran a marine supply shop
and another a bus terminal facility.
I need not recite all the evidence to establish that the
plaintiff failed to prove its case. On the contrary all of the
evidence establishes the position of the defendant that
the relationship between defendant and operator was
that of independent contractor.
From all of this it is clear that defendant and its
officers and agents clearly and reasonably considered a
lessor-lessee relationship to exist between the defendant
and the operators.
“Even if the court did not find that the plaintiff failed
to prove its case it is clear from all the evidence that the
plaintiff did not establish a pattern from which this court
could infer that all non-testifying operators were
employees or improperly compensated.
A-6
The court having found that the operators were not
employees entitled to damages we do not reach the
question of liquidated damages or overtime.
In addition to the above findings of fact and con-
clusions the court finds that it has jurisdiction of this
case and the parties by virtue of 29 U.S.C. 216(c), 29
U.S.C. 217 and 28 U.S.C. 1345.
Defendant Town Pump, Incorporated, is a
corporation with its principal place of business located at
600 South Main Street, Butte, Montana, where it is
engaged in distributing gasoline and petroleum
products.
The petition for a permanent injunction is denied
and there are no back wages or liquidated damages due.
Let judgment be entered for the defendant.
Done and dated this 28th day of September, 1983.
W. D. Murray
Senior United States District
Judge.
A-7
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MONTANA
BUTTE DIVISION
RAYMOND J. DONOVAN,
Secretary of Labor,
United States Department
of Labor,
Plaintiff, MEMORANDUM
and
vs. ORDER
TOWN PUMP, INCORPORATED,
a corporation,
No. CV-78-31-Bu
Defendant.
ee eee eee eee eee ie
BACKGROUND
This is an action for a permanent injunction, back
wages and liquidated damages brought by the Secretary
of Labor under the provisions of the Fair Labor
Standards Act of 1938, as amended, 29 U.S.C. 201, et seg
Defendant, Town Pump, Inc., is a corporation with its
principal place of business at 600 South Main Street,
Butte, Montana, where it is engaged in distributing
gasoline and petroleum products. The court’s jurisdiction
A-8
is invoked under 29 U.S.C. 216(c), 29 U.S.C. 217 and 28
U.S.C. 1345.
The case involves the application of the minimum
wage and overtime provisions of the FLSA to the
operators of gasoline service stations subject to re-
strictive lease agreements with defendant Town Pump,
Inc. The court finds that the operators were employees
within the meaning of the FLSA and, therefore, subject to
the minimum wage and overtime provisions of the Act,
all as more fully set out in the Findings of Fact and Con-
clusions of Law filed separately today.
Deposition testimony
Trial of the case was had to the court on June 17 and
18, 1980. At trial, plaintiff produced the testimony of two
persons who operated Town Pump service stations under
the terms of a “lease” entered into between defendant
and those persons. Testimony of four other operators was
introduced through depositions which were offered at
trial and admitted over defendant’s objection by order of
the court on February 26, 1981.
Defendant was granted time within which to submit
evidence to rebut the depositions, which it did by way of
deposition testimony. Plaintiff objected to most of the
deposition testimony of Thomas P. Kenneally, Daniel
Kenneally and Thomas F. Kenneally on the grounds that
it was not rebuttel, and that it was irrelevant and
prejudicial. While plaintiffs objections are sound, it has
failed to specifically object to portions of the deposition.
The court cannot rule in a general fashion and therefore
must admit the depositions.
IT IS THEREFORE ORDERED and this does order
that the depositions of Daniel J. Kenneally, Thomas F.
Kenneally and Thomas P. Kenneally be admitted into
evidence.
A-9
Back pay for persons who did not testify
As set out in the separately issued Findings of Fact
_and Conclusions of Law, defendants are and have been
‘in violation of the FLSA and will be required to pay back
wages and overtime to those operators who testified
either at trial or by way of depositions. Plaintiff had
attempted to prove violations of the FLSA as to almost all
Town Pump stations and operators in Montana, even
though no testimony was presented as to those operators.
Thus, there was presented no proof upon which the court
could make a finding of fact that the remaining operators
performed any work upon which claims for back wages
could be based. See, Marshall v. Truman Arnold Distr.
Co., 640 F.2d 906, 910-11 (8th Cir. 1981).
Plaintiff will be required to present testimony with
regard to the hours worked by each operator should it
choose to pursue those claims. Defendant, of course, will
have the opportunity to cross-examine and rebut. This
will be done at a later date.
Back pay for those operators who did testify
The current amount of back pay and damages owed
by defendant cannot be determined by the court. Plaintiff
has been ordered to provide its calculations as to hours
worked and amount owed to those operators who
testified; Challes, Crowley, Garner, Breeden, Hawk and
Savage. Once those calculations have been submitted,
the court will enter judgment, assessing both back wages
and damages against defendant.
Done and dated this 6th day of October, 1981.
W. D. Murray
Senior United States District
Judge.
A-10
A-11
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MONTANA
BUTTE DIVISION
RAYMOND J. DONOVAN,
Defendant.
)
Secretary of Labor, )
United States Department )
eal FINDINGS OF FACT
Plaintiff, CONCLUSIONS OF
ain . LAW
and
a ; ORDER
TOWN PUMP, INCORPORATED, )
a corporation, ) No. CV-78-31-Bu
)
)
)
This cause came on regularly for trial before the
court, sitting without a jury, on the 17th day of June,
1980. The plaintiff was represented by Donald R. McCoy,
Esq., Office of the Solicitor, Department of Labor,
Denver, Colorado, and the defendant was represented by
its counsel D. L. Holland, Esq.; thereupon oral and docu-
mentary evidence was introduced by and on behalf of
each of the parties, and at the close of all of the evidence
the parties rested and thereafter, within the time granted
by the court, each of the parties filed their briefs and
A-12
proposed Findings of Fact and Conclusions of Law, and
the cause was then submitted to the court for its con-
sideration and decision. The court having considered all
of the evidence and testimony submitted at the trial of the
cause and the briefs of counsel, and being fully advised in
the premises, now makes and orders filed its Findings of
Fact and Conclusions of Law as follows:
FINDINGS OF FACT
1. This is an action for a permanent injunction,
back wages and liquidated damages, brought by the
Secretary of Labor under the provisions of the Fair Labor
Standards Act of 1938, as amended, 29 U.S.C. 201 et seg.
Jurisdiction of the court is invoked under 29 U.S.C.
216(c), 29 U.S.C. 217 and 28 U.S.C. 1345.
2. Defendant Town Pump, Incorporated,
(hereinafter Town Pump) is a corporation with its
principal place of business located at 600 South Main
Street, Butte, Montana, where it is engaged in distri-
buting gasoline and petroleum products.
3. Since May 1, 1975, and continuing to the
present, defendant has had employees engaged in com-
merce including employees handling, selling or other-
wise working on goods that have been moved in or
produced for commerce.
4. Since May 1, 1975, Town Pump has distributed
and sold gasoline through 56 “own Pump” gasoline
service stations.
5. Nine of these elie those designated on
plaintiffs Exhibit 1 as Anaconda #1, Butte #1, Butte #2,
Bozeman #1, Browning, Deer Lodge, Dillon, Great Falls
and Kalispell are owned directly by Town Pump. The
remainder are owned by 47 separate corporations.
6. Town Pump is wholly owned by its president,
Thomas F. Kenneally, and members of his immediate
fauuty as are the other 47 corporations. His son,
Thomas P. Kenneally, is an accountant who has worked
in a managerial capacity for Town Pump since
_
A-13
December, 1976. His other sons, Dan, Jim and Kevin
Kenneally are “field men” employed by Town Pump to
deal with the operators of the various other stations.
7. All but two of the retail gasoline stations are
operated pursuant to “leases” which are similar in their
terms to plaintiffs Exhibit 8, an agreement dated
January 18, 1974, between Town Pump and Mrs. Judy
Challes, the operator of Anaconda #1.
8. The stations identified as Butte #1 and Polson
were excluded from consideration in plaintiffs investi- .
gation because each has a substantial independent
grocery business and a bona fide rental payment
associated with it.
9. Plaintif?s Exhibits 33-36 are lease agreements
with four other stations. Three of the four stations these
latter agreements pertain to are owned by corporations
other than Town Pump. The named “lessor” in each of
them is, however, Town Pump.
10. Each agreement purports to lease to the named
operator a self-service gas station with living quarters
attached, for a period of one year, “at the monthly rental
of one cent (1 cent) per gallon of gasoline delivered by the
lessor to the lessee.”
11. Each agreement recites that the lessee
(operator) shall maintain the premises “in good order,
condition and repair.” Each “may be cancelled at any
time by the lessor” on 30 days notice or on 24 hours notice
if the “lessee continues in possession” after the expira-
tion of the lease.
12. Paragraph 21 of the agreement states ‘that the
lessee is an independent contractor and nci an agent or
employee of the company.”
18. The Challes lease carries the additional
notation in paragraph 21 that “Hours of operation must
be comparable to similar businesses in the area.” It is
otherwise typical of the leases for all 54 stations which
are at issue.
14. Mrs. Challes testified at trial that she and her
husband had operated Town Pump #1 at Anaconda,
A-14
Montana, since February 2, 1974. She “sent in an appli-
cation” and was interviewed by Lee Eversen of Town
Pump. Before she signed the contract, Eversen told her
“that we would have free rent and utilities and that we
had the contract there. We could read it over and we
would get one cent per gallon as a commission.”
15. In addition, Challes testified that “They told us
the hours would be open from 7 to 11. If there was any
price change in the gas, they would notify us. And they
told us whether it would go up or down and we were to
change the pumps and change the sign.”
16. Mrs. Challes executed a bonding agreement for
which she put up her 1973 Chevrolet van and camper
trailer as security.
17. Besides specifying the hours of operation and
the retail price of the gasoline, Town Pump required daily
and weekly bookkeeping reports on forms which it
supplied. On these forms, Mrs. Challes recorded pump
readings, dollar sales and gallonage daily and made
weekly reports of total gallonage, cash and credit
receipts, bank deposits and tank inventory to Town
Pump.
18. She also was told by Everson to deposit each
day’s receipts to a bank account in the name of Town
Pump, Inc. from which she could make no withdrawals.
19. A number of the weekly reports are in evidence
as plaintiff's Exhibit 31. Mrs. Challes was told how to fill
them out by Tom Karagin, a Town Pump representative.
The first of these for the period January 9-16, 1977, is
typical. It shows $4,179.86 in total sales for the week and
7199.1 total gallons sold. Thus, Mrs. Challes earned a
commission of $71.99 which she was told to calculate by
converting the gallons to dollars and cents and which
she deducted from the last bank deposit of the week.
20. She was further instructed to enter this amount
as “Station Rent” under the heading “Dealer Owes Town
Pump”. She then multiplied this rent figure by two and
subtracted it from the total sales for the week to arrive at
A-15
the “Payment on Gas” figure. Finally, she would add
“Station Rent” and “Payment on Gas” to arrive at the
total amount ($4107.87 in this example) “that we were
supposed to have into the bank for Tom Kenneally. This
amount. is equal to the total sales less the $71.99
commission.
21. The weekly report form also required a listing of
each day’s bank deposits and that they be balanced
against the amount listed under “Dealer Owes Town
Pump.” Mrs. Challes was required to make up any
shortages and was responsible for bad checks or other
losses.
22. During the week of January 9-16, 1977, used as
an example, Mrs. Challes and her husband operated the
station for seven days, 16 hours per day and earned
$71.99. They remained open the hours specified by Town
Pump (7 a.m. to 11 p.m.) each day until about two years
prior to the trial when she “got permission” from Town
Pump to close at 10 p.m.
23. Her husband operated the station for about two
hours each day to enable her to shop and make her bank
deposits. Otherwise, she was required to be on the
premises, waiting on customers, doing bookkeeping,
cleaning the building and its public bathrooms, dipping
the tanks and performing similar duties.
24. Besides gasoline, she sold other items such as
cigarettes, candy, pop, ice, motor oil and gasoline addi-
tives independent of Town Pump and to her own credit
which she estimated at about $5.00 per week.
25. Mrs. Challes testified that she was told she
would receive a commission of one cent per gallon, and
“this was the way it was, the wages.” Gas was delivered
1-2 times per week by Town Pump. She signed for
deliveries of gasoline except for night deliveries. No one
ever discussed with her the wholesale price of the
gasoline and she did not understand that there was any
transaction whereby she purchased it, as the following
testimony on cross-examination by counsel for
defendant (Mr. Holland) shows:
A-16
Did Mr. Eversen explain to you that you
would have to pay for the gas?
That I would have to pay for the gas?
Town Pump would sell you the gas and then
you would have to pay them for the gas?
A. No, I never understood it that way.
26. Mrs. Challes has nothing to do with retail
prices either, other than to change the pumps and sign to
reflect the price dictated to her by Town Pump repre-
sentatives. As she stated: “I never had no say about it.
They would tell me to put it up, I would have to put it up.”
27. The station business license, grocery license
and petroleum license were all in the name of Town Pump
#1, signed by Tom Kenneally and sent to Mrs. Challes in
the mail.
28. Testimony similar to that of Mrs. Challes was
given by Mrs. Lavona Crowley, who, with her husband,
operated Town Pump #5 in Butte, Montana, from
February 15, 1979, through the present. This station is
one which is owned by a Kenneally corporation other
than Town Pump. However, like other in evidence, the
lease agreement shows Town Pump, Inc. to be the lessor.
29. Mrs. Crowley applied to Town Pump in
response to a newspaper advertisement similar to
plaintiff's Exhibit II, which recites that “no cash invest-
ment is required.” Her compensation was explained to
her by Town Pump’s Field Representative Dan
Kenneally: “We would receive a cent a gallon on our gas
commission.”
30. There was a sign on the premises “saying our
hours was from 7 to 10” and she and her husband main-
tained those hours until September, 1979.
31. She was, moreover, told by Dan Kenneally, “it
would be a full time job. We are both there and one or the
other of us had to be there at all times during the business
hours.”
32. She and her husband split their working time
about evenly. They, as did Mrs. Challes, made daily bank
deposits, made out the weekly reports and deducted one
o> &
A-17
cent per gallon as their commission. Until the contract
was changed in April, 1980, they also paid $5.00 per week
to Town Pump toward their bond.
33. Originally, the Crowleys were informed by
Town Pump of changes in the retail price of gas, but then
got permission from Dan Kenneally to simply follow the
changes in price at a Gasomat Station down the street.
34. They carry noinsurance on the station and, like
Mrs. Challes, received the business licenses in the name
of Town Pump #5 through the mail. They are responsible
for bad checks and driveaways. They are generally open
from 7 a.m. to 8 p.m. (13 hours daily) seven days a week.
Sales average 500-700 gallons per day so that their com-
missions average $5-$7 daily.
35. Bertha Garner and her husband operated a
Town Pump station on Excelsior beginning in 1972 to
December, 1972, and operated another station on
Montana Street in Butte from December 1972, to April
1977, and then in August 1977 operated Town Pump #9 in
Butte. She was paid “‘a penny a gallon” commission at all
three locations.
36. Her hours at Town Pump #9 were approxi-
mately 7 a.m. to 10 p.m. This location, like others, had a
sign in the window (facing the operator) stating
“minimum hours 7:00 a.m. to 10:00 p.m.,” “turn off the
lights during daylight hours,” “keep the driveways
clean” and “make daily bank deposits.” Either Mrs.
Garner or her husband were required to be on the
premises during hours of business.
37. Although they sold items other than gas, such
sales “wouldn’t amount to $2.00 per day,” according to
Mrs. Garner.
38. The Garners were responsible for bad credit,
checks and driveaways. All gas was furnished by Town
Pump. Mrs. Garner stated that “with the Town Pump’s
help” she and her husband set the price of gas. However,
shortly before her deposition in March 1979, “they come
and told us that the Government had asked a raise
there,” and Town Pump employees actually change the
signs for them when there is a price change.
A-18
39. Merlin Hawk testified by way of deposition. He
operated Butte #8 in March, 1979 when his depositian
was taken. He was told by Dan Kenneally when he took
over the station that he would receive one cent per gallon
for gasoline sales and 7 cents per gallon for diesel sales.
He was further told that the company would like the
station to be open from 7:00 a.m. to 10:00 p.m. Those were
his actual hours, seven days per week. He never discussed
the value of the premises with Kenneally or the fact that
an amount designated as “rent” would be paid.
46. Mr. Hawk put it “! was needing a job right at
the time and that was the only thing that came open.”
41. Hawk also was responsible for depositing the
daily receipts in Town Pump’s account. Town Pump
maintained the premises. Hawk carried no insurance
and hired no employees because it would “cost more
money than what we make.” His typical receipts for
items other than gasoline netted him a little over $2.00
per day.
42. Regarding prices to be charged for the gasoline
he was given a specific price per gallon by Town Pump to
charge and the signs were changed by “one of the
Kenneally boys.”
43. Alice Savage also testified by deposition. She
operated Butte #2 and had previously been the operator
at a Great Falls Town Pump station. At both locations
her method of compensation was the same: “We got a
penny a gallon on what we sell.”
44. The station was open daily from 6 or 7 a.m. to
10 p.m. and she and her husband split the work about
evenly.
45. She and her husband turned in the same weekly
reports as did all other operators who testified, and also
made bank deposits daily to an account belonging to
Town Pump.
46. Regarding the price to be charged for the
gasoline, Mrs. Savage testified as follows:
Q. Do they set the price of the gasoline that
you sell?
How are you ordinarily informed of a
change in the price?
They call us up.
They just call you and tell you what the new
price is, is that right?
Yes.
And then you change the pumps and the
sign?
Well, Kevin cores down and does that,
Kevin Kenneally.
47. Cloella Breeden testified by deposition that she
had operated Butte #3 since November 16, 1977. She was
told by Town Pump’s representative that “I would get a
commission off the gas, one penny to a gallon.” The
representative, a Mr. Harvey, “said there'd be long hours
that we would work and he said that would be from 7:00 to
10:00 at night . . . seven days a week.
48. She was also instructed to make bank deposits
daily and that she would be responsible for bad checks. A
sign in the station when she started contained instruc-
tions regarding daily deposits, hours from 7-10, and
turning off the lights during the day and on at dusk.
49. The station licenses were in Thomas
Kenneally’s name and Town Pump maintained the
> OP Or LPor
50. Mrs. Breeden testified she was “there con-
stantly” during the hours of 7-10.
51. Mrs. Breeden testified that the company would
call periodically and ask her to measure the tank levels.
Depending on the level, Town Pump would come and fill
the tanks. The retail price of the gasoline was set by the
“Kenneally’s.” She was not usually informed of changes
in price in advance, and in fact stated “I was at my
daughter's one day and they changed it.”
A-20
52. Another operator, Paul Orr, testified in rebuttal
as to the extent to which the main office controlled the
station operators: He operated the Town Pump stating
[sic] in Browning, Montana, from September 1976,
through March 1979, and in Columbia Falls from March
1979, through March 1980. He was in contact with field
representatives of Town Pump “almost every day.”
53. His hours of operation at both locations were
7-10. The field man told them these were the hours and
there was a sign with “instructions we were supposed to
follow,” regarding the hours to remain open and making
daily bank deposits. The sign was at both locations and
he had seen one as well at the Kalispell station.
54. Plaintiff's Exhibit 32 demonstrates the full
extent and specificity of Town Pump, Inc.’s instructions
to its operators. These instructions were posted at the
stations. Among other things the instructions required
that ‘Dealer invoices must be done as of the close of
business on the last day of the time period. Stick tanks,
read the pumps and pull your money at the close of the
day. This must not be done the day before, the day after,
or during the day. At the close of the business day only.” |
Similarly, “ Your days receipts must be deposited in the
bank each and every day. This office will be calling your
bank to verify that your deposit is made each day.”
(Emphasis in all cases in the original).
55. Defendant’s business and pay practices were
investigated beginning in April 1977, by Donald E.
Lundhagen, a Compliance Officer of the Wage and Hour
Division, United States Department of Labor. Mr.
Lundhagen testified at trial.
56. On April 14, 1977, he went to the main office of
Town Pump, Inc. and asked for the president or manager.
He was directed to “Tom, Jr.,” Thomas P. Kenneally who
is the son of the president, Thomas F., and who was
identified to him as the vice-president.
57. Lundhagen was directed also to an individual
identified as the Office Manager, from whom he obtained
A-21
documents and statements as to the operation of the
Town Pump stations.
58. In the course of his investigation he visited all
10 stations in Butte, 2 in Anaconda, 2 in Bozeman and 2
in Missoula, interviewed the operators at each, photo-
graphed the stations and examined the living quarters.
59. Lundhagen also examined the operator’s
weekly reports at each station he visited, verified the
method and amount of compensation and reviewed
copies of the lease agreement to see if they differed from
the sample given him by Town Pump which he found to
be typical. Where these documents were unavailable at
the stations, he returned to the home office to examine
them there.
60. Of the stations Lundhagen visited, each had a
“Town Pump” sign, each was very similar in
appearance and each had exactly the same record keep-
ing forms. The records were all maintained at the main
office in Butte.
61. Thestations Lundhagen visited did not vary in
their posted hours of business which, uniformly were
7:00 a.m. to 10:00 p.m.
62. The office manager related that two stations,
Butte #1 and Polson, operated differently than the rest.
After further investigation verified this, Lundhagen
excluded them from consideration.
63. Lundhagen reviewed his investigation
findings with Tom Kenneally, Jr., on April 25, 1977, ata
closing conference when he informed him that the
Department of Labor considered the operators to be
employees.
64. Lundhagen further determined from examin-
ing sales records that until January 1, 1977, most of the
stations were exempt from the minimum wage and over-
time provisions under §13(a)(2) of the Fair Labor
Standards Act, but that all were subject to them
thereafter.
65. From the company sales records for each
station for 1977 (Plaintiff's Exhibits 12 and 13) he com-
A-22
puted the amount of underpayment under the minimum
wage and overtime provisions. Using 105 hours per week
as the approximate number of hours for each station, he
divided these hours evenly between the two operators,
i.e., husband and wife who operated the stations.
66. On this basis, each operator would be due at
least 52 1/2 hours at the applicable minimum wage plus
additional 1/2 time for 12 1/2 hours under the overtime
provisic as. In 1977, this weekly amount was $270.26 for
the two operators per station.
67. From this minimum amount he subtracted the
one cent per gallon actually received at each station plus
one cent per gallon as the stated “cost” of the housing
(Tr. 135).
-68. Plaintiff has proved its case only with regard to
operators Challes, Crowley, Garner, Breeden, Hawk and
Savage. The current hour and wage calculations are not
readily available to the court and will be ordered
submitted.
69. Violations, if continuing up to the date of this
order, will result in back wages for 1981 being due.
From the foregoing Findings of Fact the court draws
the following
CONCLUSIONS OF LAW
1. The court has jurisdiction of this case and the
parties.
2. Defendant admits that its annual dollar
volume exceeds $250,000 and that it has employees
handling goods in or produced for commerce. It is there-
fore a covered enterprise engaged in commerce or in the
production of goods for commerce within the meaning of
Section 3(s)(1) of the Fair Labor Standards Act, herein-
after FLSA.
3. An enterprise is defined by the FLSA as
follows:
A-23
Section 3***
(r) ‘Enterprise’ means the related activities per-
formed (either through unified operation or
common control) by any person or persons for a
common business purpose, and includes all
such activities whether performed in one or
more establishments or by one or more cor-
porate or other organizational units including
departments of an establishment operated
through leasing arrangements, but shall not
include the related activities performed for such
enterprise by an independent contractor .. .
(emphasis added).
4. Related activities for purposes of §3(r) are those
which are the same or similiar, Hodgson v. University
Club Tower, Inc., 466 F.2d 745 (10th Cir. 1972). The
operation of self-service gasoline stations all of which are
similar in appearance and function and are operated in
similar fashion constitutes activities which are related
within the meaning of the FLSA.
5. Regardless of which corporation owns it, each
of the stations sells gasoline distributed by defendant
Town Pump, at a price set by Town Pump and at the
direction of its representatives. Weekly sales reports are
sent to Town Pump on forms it supplies. Each day the
cash receipts are deposited to Town Pump’s account, and
accounting is done at the central office in Butte,
Montana. All gasoline purchas)»g and distribution is
controlled from there. Detailed operating instructions are
given to the station operators and enforced by de-
fendant’s management. Unified operation and common
control within the meaning of Section 3(r) are clearly
present.
6. Regardless of ownership of the stations, each
operator who testified was recruited, interviewed, in-
structed and supervised by a Town Pump field repre-
sentative. Each of these field representatives are
employees of Town Pump. Prospective operators are told
by newspaper ads to apply to Town Pump and Town
A-24
Pump is the lessor on most of the leases in evidence, even
of stations it does not own. Common control of all
stations by defendant Town Pump is therefore estab-
lished within the meaning of Section 3(r).
7. The organizational structure is both “hori-
zontal, as in chain stores” and “vertical, as in the manu-
facture and disposition of a particular product.”
Although defendant does not manufacture the gasoline,
it purchases and distributes it to its retail outlets. This
satisfies the common business purpose test, Hodgsen v.
University Club Tower, supra; Wirtz v. First National
Bank and Trust Company, 365 F.2d 641 (10th Cir. 1966);
Brennan v. Arnheim and Neely, Inc., 410 U.S. 512 (1973).
8. The business activities of defendant Town
Pump, including those activities at the 54 service stations
at issue here, constitute a single enterprise for purposes of
Sections 3(r) and 3(5)(1) of the FLSA, unless performed by
bona fide independent contractors.
9. The employment relationship which the FLSA
defines is a comprehensive one:
Section 3. As used in this Act...
(d) ‘Employer’ includes any person acting
directly or indirectly in the interest of an
employer in relation to an employee.
(e) ‘Employee’ includes any individual em-
ployed by an employer.
KKK
(g) ‘Employ’ includes to suffer or permit to
work.
10. From the Supreme Court’s decision in
Rutherford Food Corporation v. McComb), 331 U.S. 722
(1947), the following indicia of independence have been
extracted, see e.g. Usery v. Pilgrim Equipment Co., 527
F.2d 1308 (5th Cir. 1976), cert. den., 429 U.S. 826, and
Marshall v. Truman Arnold Distr. Co., 640 F.2d 906 (8th
Cir. 1981).
1. The nature and extent of control retained
by the alleged employer.
A-25
2. The alleged independent contractor’s
investment in facilities.
3. His opportunity for profit and risk of loss.
4. The permanency of the relationship, and
5. The amount of initiative, skill and judg-
ment required for the success of the claimed
independent enterprise.
11. Another pertinent factor is the extent to which
the services in question are an integral part of the alleged
employer’s business, Shultz v. Mistletoe Express Service,
Inc., 434 F.2d 1267 (10th Cir. 1970).
12. For the purposes of the FLSA, an independent
contractor is one who is in business for himself; an
employee is not in business for himself, but dependent
upon finding employment in the business of another.
Mednick v. Albert Enterprises, Inc., 508 F.2d 297, 301-302
(5th Cir. 1975).
13. Courts must look to the economic realities to
determine if an employment relationship exists. Real v.
Driscoll Strawberry Assoc., Inc., 603 F.2d 748 (9th Cir.
1979). Application of these factors to the facts shown at
trial compel the conclusion that the station operators are
employees of defendant.
14. Control. The company has complete control
over every significant aspect cfthe business. Town Pump
determines the location of its stations, requires that the
operators live on the premises, and will not allow thesale
of any gasoline but its own. The company determines the
retail price of the gasoline and will not allow price
changes without its permission. The company requires
periodic sales reports on its forms and daily deposits of
receipts to its account. The company maintains sales and
receipts records at its central office and makes deduc-
tions for losses and shortages as it sees fit.
15. Defendant maintains that its operators have
some discretion to set their own hours of business. Such
discretion is illusory. The commission method of pay-
ment virtually requires the operators to maintain long
hours. In fact, the evidence shows that Town Pump virtu-
A-26
ally requires that each station be open 15 hours per day
and allows only minor flexibility as to opening and
closing times.
16. Investment. The operators have none. The de-
fendant advertises that no cash investment is required.
The facilities and equipment are owned and maintained
by defendant, except for minor repairs. While the written
agreements recite rental payments, set at one cent per
gallon sold, that is not actually paid out but is merely a
deduction from the operator’s gross receipts.
17. The licenses for gasoline sales at each station
are in Town Pump’s name and obtained by the company,
as are government gasoline allocations, as well as retail
and grocery licenses.
18. Each operator’s “investment” in his inventory
of sideline items such as cigarettes and candy is minimal
compared to the overall cashflow of the business and is
inconsequential in assessing the dependence of the
operator upon defendant. Mednick v. Albert Enterprises,
Inc., 508 F.2d 297 (5th Cir. 1975).
19. Profit and loss. Under the commission
arrangement, no one but defendant has an opportunity
for profit in the true sense of the word: return on capital.
Nor do the operators bear the risk of loss of venture
capital. The fact that defendant holds them responsible
for bad checks and other shortages simply demonstrates
their true function as little more than cashiers in
defendant’s business organization.
20. Permanency. The operators remain on the job
fox as long as they like provided they meet the require-
ments set by Town Pump. None of them has anything
resembling a business or organization capable of
offering the same services to distributors other than
defendant, see Usery v. Pilgrim Equipment, 527 F.2d
1308 (5th Cir. 1976). They are dependent upon Town
Pump for continued employment.
A-27
21. Initiative. Defendant makes much of the fact
that each operator can increase his commission by
selling more gasoline and encouraging repeat customers.
Salesmanship, however, cannot be equated with
business initiative and judgment. As in Pilgrim Equip-
ment, supra, Town Pump controls “{all] major com-
ponents open to initiative” most importantly, pricing
and the choice of distributors with whom to deal. The
only “initiative” required is provided by the economic
necessity to the operator of keeping the station open some
15 hours a day, seven days a week.
22. Finally it is clear from the evidence that the
retail sale of gasoline as performed by the operators is
“an integrated part of [Town Pump’s] business,” Shultz
v. Mistletoe Express Service, 434 F.2d 1267 (10th Cir.
1970). Town Pump “distributes” several million gallon
[sic] of gasoline annually to the stations in question. Its
gross profits are almost wholly governed by the differ-
ence between the wholesale price it pays for the gasoline
and the price at the pump, less overhead which includes
the one cent per gallon commission paid to the operator.
23. When the economic realities of defendant’s
business relationship with its operators are examined in
light of the above factors it is evident that the operators
are employees within the meaning of Section 3(e) of the
FLSA and that defendant Town Fump is their employer
within the meaning of Section 3(d) of that Act.
24. Itis immaterial that not all of the time spent on
the job by the operators is spent “working.” Readiness to
serve may be hired to the same extent as service itself.
Armour & Co. v. Wontock, 323 U.S. 126 (1944).
25. It is also immaterial that the defendant may
have convinced its station operators that they were in-
dependent contractors by stating so in the lease and by
other communication. The defendant’s attempt to affix
the name of “independent contractor” to the operators
will avail it little in ascertaining the true nature of the
relationship for FLSA purposes. Mednick v. Albert
Enterprises, Inc., 508 F.2d 297 (5th Cir. 1975).
A-28
26. Continuing violations of Sections 6 and 7 of the
FLSA since at least January 1, 1977, and unpaid mini-
mum wages and overtime compensation in substantial
amounts were shown. Therefore, the Secretary is entitled
to an injunction and back wage recovery regardless of
any argument by defendant that it did not believe it was
violating the Act, Shultz v. Mistletoe Express, supra.
Such relief is remedial rather than punitive in nature and
the purpose is “to correct a continuing offense against the
public interest,” Shultz v. Mack Farland & Sons Roofing
Co., 413 F.2d 1296, 1302 (5th Cir. 1969); Wirtz v. Malthor,
Inc., 391 F.2d 1 (9th Cir. 1968).
27. Where, as here, the employer has failed to main-
tain records of hours worked, in violation of Section 11 of
the FLSA, defendant cannot defeat plaintiffs claim for
back wages merely by showing that the evidence lacks
the precision it would have if detailed records were kept.
Plaintiff has shown the minimum extent of work per-
formed by the operators as a matter of “just and reason-
able inference,” which is sufficient to shift the burden to
defendant of coming forward with precise evidence that
fewer hours in fact were worked, Anderson v. Mt.
Clemens Pottery, 328 U.S. 680 (1946); Dunlop v. Johnson
Waste Materials, Inc., 78 CCH Labor Cases, par. 33,287
(S.D. Tex. 1975).
28. The defendant presented no evidence regarding
the operator’s hours of work and failed to rebut the
plaintiff's evidence that all were open 15 hours per day or
more, seven days a week. Damages based upon the
approximate amounts computed by plaintiff may be
awarded under Sections 16(c) and 17 of the FLSA. Mt.
Clemens Pottery, supra.
29. The defendants are entitled to credit for the
commission paid the operators and for the value of the
living quarters provided the operators. Marshall v.
Truman Arnold Distr. Co., Inc., 640 F.2d 906 (8th Cir.
1981).
30. Liquidated damages under Section 16(c) of the
FLSA are to be awarded unless defendant can meet its
burden of showing to the satisfaction of the court that it
A-29
had reasonable grounds to believe it was in compliance,
Section 11 of the Portal to Portal Act, 29 U.S.C. 260. The
court will require the submission of further evidence on
the issue of defendant’s good faith belief, and will reserve
ruling on the issue of liquidated damages.
31. Since January 1, 1977, defendant has violated
and is violating the provisions of §§5 and 15(a)(2) of the
FLSA by paying to its employees, for their employment
in an enterprise engaged in commerce or the production
of goods for commerce, wages at rates less than Two
Dollars Thirty cents ($2.30) per hour after December 31,
1976; Two Dollars Sixty-Five cents ($2.65) per hour
during the year beginning January 1, 1978; Two Dollars
‘Ninety cents ($2.90) per hour during the year beginning
January 1, 1979; and Three Dollars Ten Cents ($3.10) per
hour during the year beginning January 1, 1980.
32. Defendant has violated and is violating the pro-
visions of §§7 and 15(a)(2) of the FLSA by employing its
employees in an enterprise engaged in commerce or in the
production of goods for commerce for workweeks longer
than 40 hours since January 1, 1977, without compen-
sating said employees for their employment in excess of
40 hours in such workweeks at rates not less than one and
one-half times the regular rates at which they were
employed.
33. As aresult of these violations unpaid minimum
wages and overtime compensation are owing from
defendant to its operators Challes, Crowley, Garner.
Breeden, Hawk and Savage for the period from January
1, 1977, through December 31, 1979.
34. As tothe remaining stations and operators, the
plaintiff has failed to prove its case and must submit
testimony with regard to the hours worked by operators
of these stations. See Marshall v. Truman Arnold Distr.
Co., Inc., 640 F.2d 906 (8th Cir. 1981).
35. Insofar as the violations are continuing, addi-
tional amounts have accrued since January i, 1980, for
defendant’s operators who were so employed since that
date.
A-30
36. A judgment granting recovery is specifically
authorized by §16(c) of the FLSA.
37. Defendant, an employer subject to the provi-
sions of the FLSA, has violated and is violating the
provisions of §§11(c) and 15(a)(5) of the FLSA, in that
since January 1, 1977, it has failed to make, keep and
preserve records of its said employees and of the wages,
hours and other conditions and practices of employment
maintained by defendant, as prescribed by the regula-
tions promulgated pursuant to §11(c) at 29 C.F.R. 516.
IT IS THEREFORE ORDERED and this does order
that judgment shall be entered in favor of plaintiff,
pursuant to §17 of the FLSA permanently enjoining and
restraining defendant, its officers, agents, servants,
employees, and those persor.s in active concert or parti-
cipation with defendant who received actual notice
thereof from violating the provisions of §§15(a)(2) and
15(a)(5) of the FLSA.
IT IS FURTHER ORDERED that judgment be
entered pursuant to §16(c) of the FLSA, against
defendant and in favor of plaintiff for unpaid minimum
wages and overtime compensation in an amount to he
determined for the operators Challes, Crowley, Garner,
Breeden, Hawk and Savage.
IT IS FURTHER ORDERED that plaintiff submit
calculations of hours worked and wage and overtime
amounts owed by defendant to the operators set forth
above within 30 days of the date of this order. This
amount is to be credited with a proper amount to com-
pensate for the fair value of the living quarters provided
to the operators and the amount previously paid the
operators through the one cent per gallon commission.
Done and dated this 6th day of October, 1981.
W. D. Murray
Senior United States District
Judge.
A-31
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
RAYMOND J. DONOVAN,
States Department of Labor CA No. 83-4313
DC No. CV 78-0031
Plaintiff-Appellant,
(Montana)
TOWN PUMP, INCORPORATED, ORDER
a corporacion,
Defendant-Appellee.
November 23, 1984
tll i i i
Before: PECK*, WRIGHT and FARRIS, Circuit Judges.
Appellee’s petition for rehearing is denied.
*Hon. John W. Peck, United States Court of Appeals for the Sixth
Circuit, sitting by designation.
APPENDIX B
B-1
Fair Labor Standards Act of 1938, as amended, 29 U.S.C.
§§ 201-219
§ 203. Definitions
(d) “Employer” includes any person acting directly
or indirectly in the interest of an employer in relation
to an employee and includes a public agency, but
does not include any labor organization (other than
when acting as an employer) or anyone acting in the
capacity of officer or agent of such labor organi-
zation.
(e)(1) Except as provided in paragraphs (2) [re-
lating to an individual employed by a public agency]
and (3) [relating to individuals employed by a
relative engaged in agriculture] the term “employ-
ee” means any individual employed by an employer.
(g) “Employ” includes to suffer or permit to work.
§ 215. Prohibited acts; prima facie evidence
(a) [I]t shall be unlawful for any person — —
(2) to violate any of the provisions of section
206 or section 207 of this title, or any of the pro-
visions of any regulation or order of the Adminis-
trator issued under section 214 of this title.
(5) to violate any of the provisions of section
211(c) of this title, or any regulation or order made
or continued in effect under the provisions of
section 211(d) of this title, or to make any statement,
report, or record filed or kept pursuant to the pro-
visions of such section or of any regulation or order
thereunder, knowing such statement, report, or
record to be false in a material respect.
B-2
§ 216. Penalties; civil and criminal liability,
injunction proceedings terminating right of action;
waiver of claims; actions by Secretary of Labor;
limitation of actions; savings provision.
(c) The Secretary is authorized to supervise the
payment of the unpaid minimum wages or the .
unpaid overtime compensation owing to any
employee or employees under section 206 or section
207 of this title, and the agreement of any employee
to accept such payment shall upon payment in full
constitute a waiver by such employee of any right
he may have under subsection (b) of this section to
such unpaid minimum wages or unpaid overtime
compensation and an additional equal amount as
liquidated damages. The Secretary may bring an
action in any court of competent jurisdiction to
recover the amount of unpaid minimum wages or
overtime compensation and an equal amount as
liquidated damages. The right provided by sub-
section (b) of this section to bring an action by or on
behalf of any employee to recover the liability
specified in the first sentence of such subsection
and of any employee to become a party plaintiff to
any such action shall terminate upon the filing of a
complaint by the Secretary in an action under this
subsection in which a recoverv is sought cf unpaid
minimum wages or unpaid overtime compensation
under sections 206 and 207 of this title or liquidated
or other damages provided by this subsection owing
to such employee by an employer liable under the
provisions of subsection (b) of this section, unless
such action is dismissed without prejudice on
motion of the Secretary. Any sums thus recovered
by the Secretary of Labor on behalf of 2n employee
pursuant to this subsection shall be held in a special
deposit account and shall be paid, on order of the
Secretary of Labor, directly to the employee or
employees affected. Any such sums not paid to an
employee because of inability to do so within a
B-3
period of three years shall be covered into the
Treasury of the United States as miscellantous
receipts. In determining when an action is com-
menced by the Secretary of Labor under this sub-
section for the purposes of the statutes of
limitations provided in section 255(a) of this title, it
shall be considered to be commenced in the case of
any individual claimant on the date when the com-
plaint is filed if he is specifically named as a party
plaintiff in the complaint, or if his name did not so
appear, on the subsequent date on which his name
is added as a party plaintiff in such action.
§ 217. Injunction Proceedings
The district courts, together with the United
States District Court for the District of the Canal
Zone, the District Court of the Virgin Islands, and
the District Court of Guam shall have jurisdiction,
for cause shown, to restrain violations of section
215 of this title, including in the case of violations of
section 215(a)(2) of this title the restraint of any
withholding of payment of minimum wages or over-
time compensation found by the court to be due to
employees under this chapter (except sums which
employees are barred from recovering, at the time of
the commencement of the action to restrain the
violations, by virtue of the provisions oi section 255
of this title).
28 U.S.C. § 1291. Final Decisions of District Courts.
The courts of appeals (other than the United
States Court of Appeals for the Federal Circuit)
shall have jurisdiction of appeals from all final
decisions of the district courts of the United States,
B-4
the United States District Court for the District of
the Canal Zone, the District Court of Guam and the
District Court of the Virgin Islands, except where a
direct review may be had in the Supreme Court. The
jurisdiction of the United States Court of Appeals
for the Federal Circuit shall be limited to the juris-
diction described in sections 1292(c) and (d) and
1295 of this title.
28 U.S.C. § 1345. United States as Plaintiff.
Except as otherwise provided by act of
Congress the district courts shall have original
jurisdiction of all civil actions, suits or proceedings
commenced by the United States, or by any agency
or officer thereof expressly authorized to sue by Act
of Congress.
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.