Brief for the Respondents in Opposition — Hatton v. Brennan

3u the Supreme Court of the Wnited States

OCTOBER TERM, 1973

No. 72-1583

Jim HATTON INDIVIDUALLY AND D/B/A AIR CONTROL

ENGINEERING COMPANY, PETITIONER

V.

PETER J. BRENNAN, SECRETARY OF LABOR

ON PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS FOR

THE FIFTH CIRCUIT

BRIEF FOR THE RESPONDENT IN OPPOSITION

OPINIONS BELOW

The opinion of the court of appeals (Pet. App. 1-5)

is reported at 474 F.2d 9. The opinion of the district

court (Pet. App. 5-13) is reported at 348 F.Supp. 895.

JURISDICTION

The judgment of the court of appeals was entered

on February 27, 1973. The petition for a writ of certiorari

was filed on May 25, 1973. The jurisdiction of this

Court is invoked under 28 U.S.C. 1254(1).

QUESTIONS PRESENTED

1. Whether the definition of covered enterprise in

Sections 3(r) and 3(s) of the Fair Labor Standards Act

of 1938 (29 U.S.C. 203(r) and (s)) excludes from the cov-

(1)

2

erage of the Act employers who are engaged in only one

business.

2. Whether an employer who has “employees han-

dling * * * or otherwise working on goods that have

been moved in * * * [interstate] commerce” is exempt

from enterprise coverage under Section 3(s) by reason

of the fact that his employees are not engaged in inter-

state commerce or in the production of goods for inter-

state commerce.

STATUTES INVOLVED

The pertinent provisions of the Fair Labor Standards

Act of 1938, 52 Stat. 1060, as amended, 29 U.S.C. 201

et seq., are set forth in the petition at pp. 3-5.

STATEMENT

The Secretary of Labor brought this action under Section

17 of the Fair Labor Standards Act of 1938 (29 U.S.C.

217) to enjoin petitioner from violating the Act’s mini-

mum wage, overtime, and recordkeeping provisions,

and from continuing to withhold unpaid wages due to his

employees (A. 3-7).! The district court dismissed the

complaint without reaching the merits, on the ground

that the employees were not covered by the Act

(A. 16). The court of appeals reversed, upholding the

Secretary’s position that petitioner’s business is a cov-

ered enterprise within the definition of Section 3(s) of

the Act (Pet. App. 5).

Petitioner is engaged in Texas in the installation and

maintenance of air conditioning and heating systems,

“A.” references are to the appendix filed in the court of appeals.

We are lodging a copy of that appendix with the Clerk. “Pet. App.”

refers to the appendix to the petition for certiorari which petitioner

has filed under separate cover.

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including duct work, in new and in occupied residen-

tial structures (Pet. App. 6).2 Most of the parts used

in these operations are manufactured outside of Texas

and have moved in interstate commerce before reaching

petitioner (Pet. App. 11).

ARGUMENT

1. The court of appeals correctly held that “[peti-

tioner] is not exempt from the Act’s requirements solely

because it is engaged in only one business” (Pet. App.

2). As the court noted, the legislative purpose in adding

enterprise coverage to the scope of the Act in 1961 was

“to eliminate fragmentation” of the Act’s application

by which some employees in a business or establishment

had the protection of the Act and others who worked

side by side with them did not. S. Rep. No. 145, 87th

Cong., Ist Sess., p. 31. There is no reason why Congress

would have wished to eliminate such fragmentation

only in the special case of employees who work for

employers engaged in two or more industries. If anything,

the contrary intention is stated in the Committee Reports

of both Houses: “The bill’s approach is to treat as sep-

arate enterprises those businesses which are unrelated

to each other” (H. Rep. No. 75 (Fair Labor Standards

Amendments of 1961), 87th Cong., Ist Sess., p. 7; S.

Rep. No. 145, supra, p. 41).

It is plain also from the text of Sections 3(r) and 3(s)

of the Act that the 1961 Amendments contemplated

that single businesses would be subject to enterprise

*As the district court noted (Pet. App. 6), the Secretary claims

coverage of petitioner’s air conditioning business on the ground

that such a business is itself a covered enterprise. It is therefore

unnecessary to consider petitioner's other activities discussed

in the district court’s opinion (Pet. App. 8-10).

4

coverage. For example, Section 3(s), in defining covered

enterprises, refers expressly to “an enterprise” which

“(1)* * * is a gasoline service establishment” or “(2)

is engaged in laundering * * *,” or “(3) is engaged in

the business of construction” or “(4) is engaged in the

operation of a hospital.”

Accordingly, the courts have in a large number of

cases held businesses to be covered enterprises with-

out reference to any second business operated by the

same employer. E.g., Wirtz v. Melos Construction

Corp., 408 F. 2d 626 (C.A. 2); Shultz v. W. R. Hartin

& Son, Inc., 428 F. 2d 186 (C.A. 4); Brennan v.

Greene’s Propane Gas Service, 21 WH Cases 57,

71 CCH Lab. Cas. par. 32,907 (C.A. 5, No. 71-2339,

May 16, 1973); National Automatic Laundry and

Cleaning Council v. Shultz, 433 F. 2d 689 (C.A. D.C.);

Wirtz v. Allen Green & Associates, 379 F. 2d 198

(C.A. 6). Prior to its reversal, the instant district court

decision stood alone in holding a second business to be

required for enterprise coverage under the Act.

2. In holding that the commerce requirement of

Section 3(s) is satisfied by the “handling” of goods orig-

inating outside the State (Pet. App. 5), the court below

is in accord with the other courts of appeals which

have ruled on the issue. See Wirtz v. Melos Construction

Corp., supra, 408 F. 2d at 627-628 (C.A. 2); Clifton D.

Mayhew Inc. v. Wirtz, 413 F. 2d 658, 662 (C.A. 4);

see also Shultz v. Kip’s Big Boy, Iric., 431 F. 2d 530,

532-533 (C.A. 5).

That holding is correct. Section 3(s) defines covered

enterprises as “including [those having] employees

handling * * * goods that have been moved died

commerce,” and the courts below here found that “most

of the parts used by [petitioner's] employees in their

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work ‘were manufactured outside of and had moved in

commerce getting to Texas’” (Pet. App. 5). The leg-

islative history of the Act confirms the plain meaning

of this statutory language. See Melos, supra, 408

F. 2d at 628-629; Mayhew, supra, 413 F. 2d at 662.

It shows a specific intention to extend the Act’s cover-

age to enterprises using goods originating out of the

State in recognition of “(t]he obvious economic fact

that demand for a product causes its interstate move-

ment quite as surely as does production” (see 107

Cong. Rec. 6236). In the House, this extension was

attacked as a “far reaching” provision which would

“subject to Federal regulation any entire enterprise

which has one or more employees, who handle, sell,

or otherwise work on goods ‘that have been moved or

produced for commerce * * *’” (107 Cong. Rec. 4631),

“notwithstanding the fact that the employees may not

be engaged in commerce or in the production of goods

for commerce in the traditional sense” (H. Rep. No. 75,

87th Cong., Ist Sess., “Minority Views,” p. 63). The

House then substituted a more limited definition of

enterprise coverage (107 Cong. Rec. 4797, 4812-4813).

In the Senate, however, the Committee Report urged

adoption of the original text (S. Rep. No. 145, 87th

Cong., Ist Sess., p. 3), and motions to substitute

more limited definitions omitting the “handling” pro-

vision were rejected (107 Cong. Rec. 6088-6089, 6243).

The “far reaching” definition retained in the Senate

bill was accepted in conference (Conf. Rep. to Ac-

company H.R. 3935, H. Rep. No. 327, 87th Cong.,

6

Ist Sess., pp. 2, 14-16) and enacted. That definition

was correctly applied here.?

CONCLUSION

It is therefore respectfully submitted that the petition

for a writ of certiorari shouid be denied.

RosBERT H. Bork,

Solicitor General.

WILLIAM J. KILBERG,

Solicitor,

CARIN ANN CLAUSS,

Associate Solicitor,

JacosB I. KARRO,

Altorney,

Department of Labor.

Jury 1973.

3In Maryland v. Wirtz, 392 U.S. 183, 188, the Supreme

Court stated that “the effect of the 1961 change was * * * not

to enlarge the class of employers subject to the Act”. As the Court

of Appeals for the Second Circuit has pointed out, however, that

statement was addressed only to the portion of the 1961 amend-

ment which extended the Act's coverage to all employees of enter-

prises that had some employees engaged in commerce or in the

production of goods for commerce. It was “not directed to the

impact of the words concerning employees working with goods

that ‘have been moved in* * * commerce ****” (Melos,

supra, 408 F. 2d at 628, n. 5).

Pend part tia