Petition for a Writ of Certiorari — Lesser v. Sertner's, Inc.

BS eee

In THE

Supreme Court of the United States

Ocroser TERM, 1948

Max M. Lesser,

Plaintiff-Appellee,

against

Szatner’s Inc., Murray SertNeR and Pau. SERTNER,

trading as Renoras: Propucts Company,

Defendants-Appellants.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES CIRCUIT COURT OF APPEALS,

FOR THE SECOND CIRCUIT, AND BRIEF

- IN SUPPORT THEREOF.

d

Max R. Srmon,

Attorney for Plaintiff-Appellee.

Question Presented

Statute Involved

Reasons for Granting the Writ

1,

This case presents an important Federal ques-

tion which has not been, but should be, settled

by this Court

The decision of the Circuit Court of Appeals in

this case is, in certain respects, in conflict with

the decision of this court in Roland Electric Co.

v. Walling, 326 U. S. 657

The decision of the Cireuit Court of Appeals in

this case is inconsistent with decisions of other

Cireuit Courts of Appeals

. The legislative history of Section 13 (a) (2)

clearly indicates that the court below was in

error in extending the exemption to a large

scale, factory type industry or enterprise such

as conducted by respondent

. Thedecision below is in conflict with the official

interpretation of section 13 (a) (2) by the

Wage-Eour Administrator

The court below unjustifiably gave respondent

the benefits of an unusually broad interpretation

of Section 13 (a) (2) despite this court’s ad-

monition to the contrary in A. H. Phillips Co.,

Ine. v. Walling, 329 U. S. 490

Conclusion

ii INDEX

Cases CITED

an

Roland Electric Co. v. Walling, 326 U. S. 657, 676 ..12 13

Mabee v. White Plains Publishing Co., 327 U. 8. 178.. 14

Skidmore v. Casale, 160 F. (2d) 527 ................ 14

Davis et al. v. Goodman Lumber Co., 133 F. (2d) 52, -

We 5555 55 REAGG 55a whos cb as hohe Vedas eee 14

Wabash Radio Corp. v. Walling, 162 F. (2d) 391, 394 14

A. H. Phillips v. Walling, 324 U. S. 490, 496 ....... 14,15

A. H. Phillips v. Walling, 329 U. S. 490 ......... 23, 24, 25

Guess v. Montague, 140 F. (2d) 500, 503 ............ 15

Overnight Motor Transp. Co. v. Missel, 316 U. 8. 572.. 17

Fleming v. Hawkeye Pearl Button Co., 113 F.2d 52... 2%

ee ee BE OS GS er 23

Miller Hatcheries v. Boyer, 131 F. 2d 283 (C. C. A. 8,

MEE eich ik nna eid inva aki a biatnd i ne phAeneeee 23

Fleming v. A. B. Kirschbaum Co., 124 F. 2d 567

ise sy a OEE ch 3 640. s'oe seawhad ccessecunegh 3

Helena Glendale Co. v. Walling, 132 F. 2d 616 (C. C. A.

Re BACH AAG A BG 24

Ralph Knight, Ine. v. Mantel, 135 F. 2d 320 (C. C. A.

CUED bd Kh Aces «BA ded nsedd Se peedbanlsasihee 4

Calaf v. Gonzalez, 127 F. 2d 934 (C. C. A. 1, 1942) .... 24

Walling v. Reid, 139 F. 2d 323 (C. C. A. 8, 1943) .... 24

Schmidtke v. Gonesa, 141 F. 2d 634 ‘C. C. A. 1, 1944) 2%

Statute Crrep

Fair Labor Standards Act of 1938:

SN hc cane casas Cancnth bcees &ace bee cenen 2

MISscELLANEOUS

‘Interpretive Bulletin No. 6’-—Wage-Hour Adminis-

RES AER he Aa i etac rhe 17, 18, 19, 20, 21, 22

In THE

Supreme Court of the United States

Ocrozer TERM, 1948

Max M. LessEr,

against

laintiff-Appellee,

Seetwer’s Inc., Murray SertNer and Pau. Sertver,

trading as Renoras Propucts Compary,

Defendants-Appellants.

+

~

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES CIRCUIT COURT OF APPEALS,

FOR THE SECOND CIRCUIT, AND BRIEF

IN SUPPORT THEREOF.

Your petitioner, Max M. Lesser, respectfully prays that

a writ of certiorari issue to review the judgment and man-

date of the Cireuit Court of Appeals for the Second Cir-

cuit, entered in the above case on February 18, 1948, which

reversed a judgment in petitioner’s favor and directed a

dismissal of his complaint.

Opinions Below

The opinion of the District Court (R. 461-471) is re-

ported at 76 F. Supp. 144.

The opinion of the Circuit Court of Appeals (R. 494-

500) is reported at 166 F. (2d) 471.

Jurisdiction

The judgment of the Circuit Court of Appeals was ep.

tered on February 18, 1948 (R. 501). The jurisdiction of

this Court is invoked under Section 240 (a) of the Judicial

Code as amended by the Act of February 13, 1925.

Question Presented

The sole question at issue here is whether an industrial

and factory enterprise, such as respondent, conducting a

completely integrated wholesale and retail business, and

also engaged in regularly producing goods for interstate

commerce, is entitled to immunity from the provisions of

the Fair Labor Standards Act of 1938 (29 U. S. C. A. Sees,

201 et seq.) by virtue of the exemption contained in See.

tion 13 (a) (2), 29 U. S. C. A. See. 213 (a) (2).

Statute Involved

The pertinent provisions of the Act involved here are

Sections 7, and 13(a), Subdivision (2).

Section 7 provides:

‘*No employer shall, except as otherwise provided

in this section, employ any of his employees who is

engaged in commerce or in the production of goods

for commerce—

(1) for a workweek longer than forty-four hours

during the first year from the effective date of this

section,

(2) for a workweek longer than forty-two hours

during the second year from such date, or

(3) for a workweek longer than forty hours after

the expiration of the second year from such date, un-

a

less such an employee receives compensation for his

employment in excess of the hours above specified at

a rate not less than one and one-half times the regular

rate at which he is employed.’’

Section 13 (a), Subdivision (2), provides as fellows:

‘“‘The provisions of sections 6 and 7 shall not apply

with respect to (2) any employee engaged in any re-

tail or service establishment the greater part of whose

selling or servicing is in intrastate commerce.”’

Facts

Both courts below concurred in the conclusion that pe-

titioner, during the course of his employment herein, was

an employee engaged in commerce within the purview of

Section 7 of the Act, and was, therefore, entitled to its

benefits. The reasons therefor are fully set forth in both

of the opinions below. This question, however, is not at

issue here.

This petition concerns itself solely with the conclusion

of the Circuit Court of Appeals that respondent was a

“retail or service establishment’’ and, therefore, entitled

to the exemption contained in Section 13 (a)(2) of the

Act.

All the pertinent facts regarding the nature and char-

acter of the business carried on by the respondent have

been fully set forth in the uncontested findings of the

Trial Court (R. 472-481). They are as follows:

1 Plaintiff, Max M. Lesser, was employed by the defend-

ant, Sertner’s Inc., a domestic corporation, from the 2nd

day of January, 1940 to March 17th, 1944.

2. During the aforementioned period, said defendant was

engaged in the business of cleaning, processing, renovating,

4

repairing, ete. of upholstered Revaliuen; draperies, curtaing,

rugs and carpets.

3. During the aforementioned period, the said defendant

was located on, and occupied, the entire twelfth floor (about

125 feet in length) of a loft building, located at 305 FE,

63rd Street in the Borough of Manhattan, City and State

of New York, which is a factory neighborhood.

4. The stockholders of said defendant corporation were

the individuals Murray Sertner and Paul Sertner, who

were, respectively, the Secretary-Treasurer and President

of said defendant corporation.

5. During the period of his employment herein, plain-

tiff was employed by the defendant, Sertner’s, Inc., as

the receiving and shipping clerk and his duties were to

take care of and assist in the receiving and shipping of

all the merchandise that came in and went out of the prem-

ises of the defendant, Sertner’s, Inc.; to physically handle,

package, assort, route, wrap and unwrap said merchandise;

to pack and label boxes, bags and curtains; and to load and

unload trucks. He also cleaned furniture, especially after

March 5, 1943.

6. During the aforementioned period, the defendant,

Sertner’s, Inc., was operating its premises in the nature of

a full-fledged factory, with its employees-engaged in vari-

ous physical and mechanical operations, such as shipping,

receiving, pressing, finishing, bagging of curtains, clean-

ing of furniture, ete. Said defendant also employed on its

premises a female clerical employee, engaged in doing its

clerical work and bookkeeping.

7. During the aforementioned period, the ultimate ccn-

sumer, whose goods were cleaned and processed by this

defendant, rarely came into this defendant’s premises.

5

8, During the period at issue, this defendant operated

trucks which it used to pick up and deliver all the goods

worked on, processed and physically handled by it.

9, This defendant did not possess the necessary furni-

ture, equipment and decorative accessories, nor did it at-

tempt to set up its premises in such fashion as to attract

the patronage of the general consuming public. Its bnsi-

ness was not procured in this manner; nor, unlike the typi-

cal local, neighborhood or corner retail establishment, was

it seeking this type of business. The defendant procured

no business from strangers off the street who happened to

be walking by its premises, nor was it so located or

equipped as to handle this type of business. The defendant

didn’t do any over the counter business with the ultimate

consumers.

10. During the period of plaintiff’s employment herein,

over 90% of the business done by the defendant was

charged to the credit of its customers. Less than 10%

of the total business done by the defendant was in the na-

ture of C.0.D. transactions (t.e. with payment required to

be made upon delivery of the goods).

11. Approximately one-third of defendant’s total busi-

ness was procured from and through interior decorators,

who recommended their customers or clients to the de-

fendant. The defendant constantly advertised to, and ac-

tively solicited the assistance of, interior decorators for

business; and paid these interior decorators a commission

of approximately 10% on all business obtained from and

through them. In such cases the ultimate consumer was

considered, both by the defendant and by the interior

decorators, as the client or customer of the interior decora-

tors and not that of the defendant. Repeatedly, in its ad-

vertising to interior decorators, the defendant referred to

the ultimate consumer as the client of the decorator, and

in the correspondence from the interior decorator to the

defendant, the interior decorator referred to the ultimate

consumer as “‘my”’ client.

12. The defendant employed no inside sales clerks on its

premises to wait on trade, nor was it the duty or function

of any of the other employees of the defendant tc wait on

trade.

12. (a) Out of an approximate total of twenty em.

ployees, defendant employed never less, and sometimes

more, than four outside salesmen whose duties it was to

go out and solicit busines for it.

13. Defendant did not possess a selling counter, or a

cash register to ring up sales, or shelves for the display ~

and convenient arrangement of merchandise, or display

windows to attract the patronage of the general public.

14. Defendant maintained on its premises various me-

chanical equipment used by it in the operation of its

business.

15. The customers, for whom the defendant regularly

did work or whose goods were so processed by the defend-

ant, resided, or were located, in the five boroughs of the

City of New York (t.e. Bronx, Manhattan, Queens, Brovk-

lyn and Richmond), in Westchester County, as far north

as Harrison, New York, in Nassau and Suffolk Counties

(Long Island), in Connecticut and New Jersey.

16. During the entire period of plaintiff’s employment,

defendant regularly and continuously processed and physi-

cally worked on goods belonging to furniture dealers, trade

shops and interior decorators. A furniture dealer is a

manufacturer or distributor of furniture. A trade shop

is a manufacturer or distributor of curtains, drapes, up-

holstered furniture, slipcovers, rugs and carpets. The

7

goods so worked on and physically handled by the defend-

ant were, in turn, sold in commerce to third parties by said

furniture dealers, trade shops and interior decorators.

17. Drring the entire period at isue here, the defendant

regularly and continuously processed and physically

worked on goods belonging to department store and other

business, industrial and commercial users, such as hotels,

banks, restaurants, manufacturing establishments, eic., and

for various institutions, such as churches and hospitals.

18. The work performed by the defendant, Sertner’s,

Inc., or goods belonging to furniture dealers, trade shops

and interior decorators was at a better or cheaper price

than that charged for work performed on goods belonging

to the individual or private householder or home owner.

19. The total volume of business done by the defendant

for each year from 1940 through 1943, together with a

breakdown of the business done for each of those years

by the defendant, as appears on Defendant’s Exhibit K in

evidence, is as follows:

1940—Total business done—$106,802.39

No. Percent

of Cus- of total Amount

tomers Volume Billed

1. Furniture Dealers 27 %of 1% $F$ 512.44

2. Trade Shops 16 “oe of 1% 647.63

3. Decorators 135 84% 9,062.20

4. Department stores 5 Se of 1% 655.25

5. Commercial Con-

sumers 94 6% 6,482.72

6. Institutions 1 oe of 1% 114.45 $ 17,474.69

(Churches etc. )

16 40%

Balance of annual volume,

private residences 83 40%

8

1941—Total business done—$117,577,39

No. Percent

of Cus- of total Amount

tomers Volume Billed

1. Furniture Dealers 27 “eof 1% $ 720.76

2. Trade Shops 16 “eo of 1% 717.81

3. Decorators 186 88% 10,395.77

4. Department stores 6 o of 1% 331.25

5. Commercial Con-

sumers 156 . 7 %0% 8,571.58

6. Institutions 5 % of 1% 185.55 20,925.72

(Churches etc. )

17 H%

Balance of annual vc ‘ume,

private residences 82 4% $ 96,651.67

1942—Total business done—$121,218.42

No. Percent

of Cus- of total Amount

tomers Volume Billed

1. Furniture Dealers 32 Ywoll%® $F$ 543.46

2. Trade Shops 17 % of 1% 969.52

3. Decorators 167 8% 9,727.64

4. Department stores 6 % of 1% 462.75

5. Commercial Con-

sumers 159 7 %0% 9,271.41

6. Institutions 7 X of 1% 237.26 21,212.04

(Churches etc. )

17 %0%

Balance of annual volume,

private residences 82 440% $100,006.38

1943—Total business done—$158,614.08

No. Percent

of Cus- of total Amount

tomers Volume Billed

|, Furniture Dealers 34 4 of 1% =$ 1,168.99

2 Trade Shops 2 % of 1% 680.22

3, Decorators 185 7% 11,545.26

4, Department stores 7 %F% of 1% 933.34

5, Commercial Con-

sumers 173 7.9% 12,557.44

6, Institutions 9 o of 1% 698.03 27,883.28

17 K%

Balance of annual volum:,

private residences 82 K% $130,730.80

%. During the period of plaintiff’s employment, approx-

imately 2% of the goods and merchandise regularly and

continuously processed and physically worked on by the

defendant, Sertner’s, Inc., belonged to and was shipped to

customers outside of the State of New York.

21. The greatest part of the work done by the defendant

was done for it by sub-contractors whom it employed for

this purpose. On its own premises the deferdant only

cleaned, renovated and repaired upholstered furniture.

The actual cleaning and renovating of drapes, slipcovers,

curtains, rugs and carpets was done by these various sub-

contractors.

22. One of the principal divisions of the defendant’s

total business was the cleaning, renovating and processing

of rugs.

93. The actual cleaning, renovating and processing of the

rugs, however, was done not by this defendant but by a

sub-contractor, the Lincoln Rug Co., located in East

10

Newark, New Jersey, whom said defendant employed for

this purpose.

24. The trucks of the Lincoln Rug Co. used to call

at the premises of this defendant to pick up the rugs for

delivery to the plant of this sub-contractor in East New-

ark, New Jersey.

25. Also, the trucks of the Lincoln Rug Co. used to re.

deliver daily to this defendant the rugs which it physically

cleaned, renovated and processed for ad at its plant at East

Newark, New Jersey.

26. Defendant’s (i.e. Sertner’s, Inc.) trucks did, on sey-

eral occasions each day, bring into its premises truck loads

of merchandise which it had picked up from the defend-

ant’s customers. Rugs to be cleaned, renovated and proc-

essed represented a substantial part of these truck loads

of merchandise. Defendant’s business with the Lincoln

Rug Co. amounted to about $5600 a year.

27. Plaintiff would help unload the defendant’s trucks

and would physically handle and unwrap said rugs. Plain-

tiff would then make out job tickets for these rugs, would

move them into their respective spaces, and would also

make the appropriate entries in the defendant’s records

regarding the same. Plaintiff then physically prepared

these rugs for shipment to the Lincoln Rug Co. and then

would help load these rugs into the truck of the Lincoln

Rug Co. and would otherwise physically work on and

handle said rugs for the purpose of getting them out of

the premises of the defendant and into the truck of said

Lincoln Rug Co,

28. Plaintiff’s physical activities in connection with the

rugs which came into the premises of the defendant, Sert-

ner’s Inc., and which were then shipped and delivered to

New Jersey for processing, renovating and cleaning con-

ll

sumed, during the entire period of his employment herein,

consumed several hours of his working time each day. A

substantial portion of plaintiff’s activities directly related

to the movement of the aforementioned rugs in interstate

commerce.

29, During the entire period at issue here there was car-

ried on in the premises of the defendant, Sertner’s Inc., as

a regular and integrated part of the total activities of this

defendant, the business of producing and bottling cleaning

fuid for sale. This cleaning fluid was called Renofab

Cleaning Fluid. In 1940, net sales of this cleaning fluid

were in the amount of $1,059.19; in the year 1941 net sales

were in the amount of $1,035.34 and for the years 1942,

1943 and 1944 net sales were in the approximate amount of

$1,000.00 yearly.

30. Approximately 22% of the sales of the said cleaning

fluid were in interstate commerce. The Renofab Cleaning

Fluid was owned by a company known as Renofab Prod-

ucts Co., a co-partnership composed of the individual de-

fendants in this action, Murray Sertner and Paul Serner.

31. The Renofab Products Co. never had a bank account,

never possessed any books of account, never had any em-

ployees, never had any delivery service and had no sepa-

rate place of business.

32. All the work done in connection with the bottling,

producing, manufacturing, selling and shiping out of said

Renofab Cleaning Fluid was done by employees of the de-

fendant, Sertner’s Inc., including the plaintiff. All the

transactions of said Renofab Products Co. were recorded

in the books of the defendant, Sertner’s Inc., and by the

employees of said defendant. The Renofab Cleaning Fluid

was delivered by the trucks of Sertner’s Inc.

12

33. There was no segregation or separation of the vari.

ous types of activities carried on by the defendant, Sert.

ner’s Inc., during the period of plaintiff’s employment

herein. The employees of the defendant, including the

plaintiff, performed duties and rendered services in cop.

nection with the retail and wholesale business of this de.

fendant; in connection with the manufacture, production,

bottling and sale of Renofab Cleaning Fluid; in connection

with the services rendered and work performed by it for

industrial, business and commercial users; in connection

with the services performed and work rendered by the de.

fendant, Sertner’s Inc., on goods owned by interior decora-

tors, furniture dealers and trade shops, and which was then

resold by them in commerce to third parties; and in con-

nection with work done for private and individual con-

sumers as householders and home owners. The entire en-

terprise known as Sertner’s Inc., encompassing all the

different activities set forth in this finding, was consoli-

dated and operated as one distinct and integrated business

unit.

It is petitioner’s contention that, based upon the fore-

going facts, respondent was not a ‘‘retail or service estab-

lishment’’ within the exemption contained in Section 13

(a) (2) of the Act. It will be here demonstrated that the

decision of the Circuit Court of Appeals, in this connec-

tion, can be supported neither by the legislative history of

this section, nor by the official interpretation of the Wage

and Hour Administrator which is entitled to great weight

(Roland Electric Co. v. Walling, 326 U. S. 657, 676). It is

further the contention of the petitioner that the decision

below is inconsistent with decisions of other Circuit Courts

of Appeal and, in certain respects, is also inconsistent with

decisions of this court.

13

Reasons for Granting the Writ

1. This case presents an important Federal question which

has not been, but should be, settled by this Court.

The principal question here involved, é, ¢., whether a fac-

tory type industry or enterprise, such as respondent, doing

a completely integrated retail and wholesale business, and

also regularly engaged in producing goods for interstate

commerce, is entitled to the exemption contained in Section

13(a)(2) of the Act, has not yet been decided by this court.

There are many thousands upon thousands of wage

earners throughout the country, employed in similar type

of dry cleaning or laundry establishments, etc., whose

rights under the Act are affected by the decision below.

It is respectfully urged therefore that certiorari should be

granted in order to review this question which is of such

vital importance to these many employees and their em-

ployers.

2. The decision of the Circuit Court of Appeals in this case

is, in certain respects, in conflict with ‘the decision of this

court in Roland Electric Co. v. Walling, 326 U. S. 657.

It is unquestioned that, as a regular and integral part

of its total activities, respondent was contiauously engaged

in the producing and bottling of cleaning fluid for sale in

interstate commerce (Findings 29, 33; RK. 480-481, 37-38,

115-16, 169). Respondent was, by virtue thereof, fore-

closed from urging that it was entitled to the exemption

contained in Section 13(a)(2) of the Act. This court so

held, in Roland Electric Co. v. Walling, with the terse ob-

servation that the ‘‘origin of this clause Sec. 13(a)(2),

had nothing to do with establishments ‘producing goods

for [interstate] commerce’ ’’ (326 U. S. pp. 666-667).

Nor is the fact that this portion of its business rep-

resented but a small portion of its total business suffi-

cient to deprive petitioner from the benefits of the above

14

decision or to afford immunity to respondent from the

Act’s provisions. It must not be overlooked that, despite

the smallness of this busines, it, nevertheless, was a regy.

lar, integral and continuous part of the total business done

(Findings 29, 33; R. 37-38, 115-116, 169, 480-481). It is the

character rather than the size of the activity which is the

controlling feature (Mabee v. White Plains Publishing Co.,

327 U. S. 178; Skidmore v. Casale, 160 F. (2d) 527; Davis

et al. v. Goodman Lumber Co., 133 F. (2d) 52, 54).

3. The decision of the Circuit Court of Appeals in this cam

is inconsistent with decisions of other Circuit Courts of

Appeals. SNe

It is obvious that the wholesale activities of the respond-

ent, employer, in processing goods belonging to furniture

dealers, interior decorators and trade shops (who were

charged better or lower prices than those charged to the

ultimate consumer), and who then resold these goods to

the ultimate consumer, were not the type of activities em-

braced within the exemption. Equally non-exempt were its

activities in connection with the production of goods for

interstate commerce (Findings 16-18). These non-exempt

activities were not carried on in separate departments or

by separate employees. Quite to the contrary there was

here an indiscriminate commingling of exempt and non-_

exempt activities (Finding 33, R. 481).

Under such circumstances, the Sixth Circuit Court of

Appeals recently held, in Wabash Radio Corp. v. Walling,

162 F. (2d) 391, 394:

‘*Where exempt and non-exempt characteristics of the

business are so intermingled as to be inseparable, the

exemption is denied entirely*.’’

* Cf. A. H. Phillips v. Walling, 324 U. S. 490, 496: “The com-

bined retail-wholesale nature of petitioner’s interstate business would

prevent it from properly being classified as a local ‘retail establish-

ment.

15

The decision below also is in conflict with the decision

of the Fourth Circuit Court of Appeals in Guess v. Mon-

tague, 140 F. (2d) 500, 503, wherein it was held that the

retail or service establishment exemption in Section 13(a)

(2) ‘does not extend to manufacturing or processing goods

for sale’’ (140 Fed. (2d) 500, 503). ‘‘Nor, in such cases’’,

the Court pointed out, ‘‘is the employer’s business any

the less within the coverage of the Act because some of

his activities may include intrastate retail sales or servic-

ing.”

4. The legislative history of Section 13 (a) (2) clearly in-

dicates that the court below was in error in extending

the exemption to a large scale, factory type industry or

enterprise such as conducted by respondent.

It is petitioner’s contention that it was the intent of Con-

gress to extend the exemption contained in Section 13 (a)

(2) solely to small, local establishments doing a strictly

retail business, on an over the counter, cash basis, with

the individual ultimate consumer. The legislative history

of this section amply demonstrates that a full-fledged, large

scale, factory or industrial enterprise such as carried on

by respondent was not intended to be embraced within this

exemption. ~

See. 13 (a) (2) received the judicial scrutiny of this in

A. H. Phillips v. Walling, 324 U. S. 490, wherein it was

stated as follows:

“From the standpoint of its legislative ancestry,

Section 13 (a) (2) is the offspring of a manifest de-

sire to exclude from the scope of the Act ‘business

in the several states that is of a purely local nature.’

Sen. Rep. 884, 75th Cong., Ist Sess., p. 5. Congress

was interested in exempting those regularly engaged

in local retailing activities and those employed by

small local retail establishments, epitomized by the

corner grocery, the drug store and the department

16

store, It felt that retail concerns of this nature do

not sufficiently influence the stream of interstate com.

merce to warrant imposing the wage and hour re.

quirements of them. Ibid, p. 5. Section 13 (a) (2) ig

a-part of the Act only because of the fear that Section

13 (a) (1), in exempting employees regularly en.

gaged in a ‘local retailing capacity,’ did not clearly

exclude those employed by local retailers who are situ.

ated near state lines and who make occasional inter-

state sales. Walling v. Jacksonville Paper Co., 317

U. S. 564, 571.’’ (Emphasis supplied.)

In further demonstrating that the exemption in question

was intended to apply solely to the small local or corner

retailer doing a ‘‘strictly retail’’ business on an over-the-

counter cash basis, this court, in foot note No. 7 to the above

case, stated as follows:

‘‘The original language of Sec. 13 (a) (2), intro-

duced as an amendment by Representative Celler, ap-

plied to any retail ‘industry’. Representative Celler

stated that if the amendment were accepted ‘retail

dry goods, retail butchering, grocers, retail clothing

stores, department stores will all be exempt.’ Several

other Congressmen expressed their desire to assure

the exemption of ‘the corner grocerv store man or the

filling station man’ and ‘the local grocerymam, drug-

gist, clothing store, meat dealer—any merchant in

fact.’ 83 Cong. Rec. 7299, 7436-7438. The exemption

as it finally emerged from the joint House-Senate

conference committee applied to any retail ‘establish-

ment’ rather than ‘industry’. The use of the word

‘establishment’ is more appropriate to the small local

retailers which Congress had in mind and clearly in-

dicates that Congress meant by it something less or

different than ‘industry’ or ‘enterprise’.’’ (Emphasis

supplied. )

17

A mere cursory inspection of the pertinent and undis-

puted findings in this case, all based upon more than sub-

stantial evidence, amply substantiates the decision of the

trial court that, in accordance with the above criteria, ap-

pellant was not entitled to a Sec. 13 (a) (2) exemption

(Findings 3, 6, 7, 8, 9, 10, 11, 12, 12(a), 18, 14, 15, 16, 17,

18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33,

34, R. 472-481). Appellant was conducting not a retail

service establishment, but a large full scale factory or

industrial enterprise and, therefore, was not entitled to im-

munity from the Act’s provisions.

5. The decision below is in conflict with the official inter-

pretation of Section 13 (a) (2) by the Wage-Hour Ad-

ministrator.

The Wage-Hour Administrator has formally issued an

official bulletin interpreting Section 13 (a) (2) entitled

“Interpretive Bulletin No. 6’’. Of course, such interpre-

tive bulletins are persuasive and are entitled to great

weight (Overnight Motor Transp, Co. v. Missel, 316 U. S.

572, foot note No. 17).

In paragraph 3 of Bulletin No. 6, the Wage-Hour Ad-

ministrator preliminarily states as follows:

“The courts have indicated that all exemptions in

the act should be construed narrowly. The person

claiming an exemption must show affirmatively that

his case falls both within the language and the statu-

tory purpose. Section 13 (a) (2), was intended to

apply typically to the grocery store, butcher shop, hab-

erdashery, clothing store, filling station, beauty parlor,

hotel, and similar commonly recognized retail and ser-

vice establishments. Unless an establishment is clearly

a retail or service establishment for purposes of section

13 (a) (2), an assumption that the exemption applies

involves considerable risk of violation.’’ (Emphasis

supplied. )

18

Later on in the Bulletin the Administrator discusses, at

great length, the type of establishment that could claim the

benefits of a 13 (a) (2) exemption, and has set up varions

criteria, which, in all respects, should be possessed by sneh

an establishment. Obviously, in view of the humanitarian

purposes of the Act, and the strict construction of an ex.

emption against an employer, the appellant should, if its

plea be successful, bring itself squarely within the Admin.

istrator’s definition. While, normally, departure from, or

an inability to fully satisfy, any of the important tests laid

down by the Administrator should suffice to invalidate a

plea of exemption, it will soon be here amply demonstrated

that this appellant has failed to meet many of these tests,

Thus, in paragraph 23 of Bulletin No. 6, the Wage-Hour

Administrator has stated as follows:

‘‘Many of the characteristics outlined above with

respect to retail establishments are helpful in de

termining whether a given establishment is a service

establishment within the meaning of section 13 (a) (2).

Service establishments are usually local in character,

are usually open to the general consuming public and

usually render a service to private individuals for

direct consumption.’’ (Emphasis supplied.)

At bar, appellant was obviously not the type of establish-

ment delineated above (Findings 7, 8, 11, 12, 12(a), 15,

17-20, 29-33).

In paragraph 24 of Bulletin No. 6, the Administrator

further states as follows:

‘‘Typical examples of service establishments akin

to retail establishments, within the meaning of the

exemption are: Restaurants, cafeterias; roadside

diners; hotels; tourist houses; trailer camps; home

laundries; barber shops; beauty parlors; public baths;

scalptreatment establishments; masseur establish-

ments; funeral homes; embalming establishments;

19

crematories; establishments engaged in cleaning, dye-

ing, pressing, altering and repairing hats, clothing,

and household goods for private individuals; valet

shops; shoe repair shops; shoe-shine parlors: dress-

suit rental establishments; public garages; automo-

pile laundries; ‘drive it yourself’ establishments ; bat-

tery shops; parking lots; musical instrument repair

shops; piano tuning establishments; radio repair

shops; watch, clock, and jewelry repair establish-

ments; household refrigerator service and repair

shops. These establishments operate in the same man-

ner as retail establishments and have substantially the

same attributes. The principal difference is that their

revenue is derived primarily from the sale of service

instead of from the sale of merchandise.”’

It is highly apparent from the foregoing that the service

establishment, intended by Congress to be exempt from

the Act, was, unlike the full-fledged industrial enterprise

carried on by appellant, the corner or local retail merchant

doing a strictly retail business, principally on a C.O.D.

basis, directly with the general consuming public in the

locality in which located, or from passersby in the street.

Such a retail business would normally render all its ser-

vices in small quantities, and on an over-the-counter basis,

to private individuals rather than to industrial and busi-

ness users. Clearly, appellant was not this type of estab-

lishment (Finding 3, 7-11, 15-20, 29-30).

In paragraph 9 of Bulletin No. 6, the Wage-Hour Ad-

ministrator further states as follows:

‘Although retail establishments are not uniform in

appearance or manner of operation, they possess a

number of common physical characteristics which

serve as a helpful guide in determining whether a par-

ticular establishment is appropriately to be classified

as a retail establishment for purposes of section 13

20

(a) (2). Ordinarily sales clerks are employed in the

establishment to assist customers in making purchases

rather than outside salesmen who solicit orders. Re.

tail establishments usually have selling counters, cash

registers to ring up sales, shelves for the display and

convenient arrangement of merchandise, and display

windows to attract the patronage of the general public.

Retail establishments maintain a stock of merchandise

on hand and not.:ally make sales over the counter

from such stock. They do not have manufacturing

equipment or other machinery normally found in fae.

tories.”’

Appellant fails, in every respect, to meet the tests set

forth in this paragraph of the bulletin. It employed no

inside sales clerks, or any other person to wait on trade;

the ultimate retail customer rarely, if ever, came into its

premises, and, in direct contravention to the Administra-

tor’s test, a substantial portion of its employees were out-

side salesmen who solicited orders (Findings 7, 12 and

12(a)). Appellant possessed no selling counters, no cash

registers to ring up sales, and had no display windows to

attract the patronage of the general public. Furthermore,

its premises were used as a full-fledged factory, containing

various departments, with all sorts of mechanical equip-

ment used in its operations. Also, unlike the typical or

purely local service establishment, appellant was located

on the twelfth floor of a loft building, in a strictly loft

building neighborhood, and, thus, was not in a position to,

nor did it attempt to, directly attract the patronage of the

general consuming public (Findings 3, 6, 7-9, 11, 12, 12(a),

13-14; R. 472-475).

In paragraph 25 of Bulletin No. 6, the Administrator

further states:

‘* Another example of an establishment which would

not be a service establishment * * * is an industrial

21

laundry or linen supply company which cleans or sup-

plies coats, covers, towels, sheets, ete., for railroads,

hotels, restaurants, beauty parlors, barber shops,

stores, hospitals, and other industrial or business cus-

tomers. Such ar industrial laundry or linen supply

company, unlike the home laundry which serves pri-

vate individuals, does not stand in a position similar

to that occupied by the retailer.’’

At bar, appellant regularly and continuously worked on

and processed goods in large quantities, and had many

transactions in large amounts with various industrial busi-

ness and institutional users (t. e., not with private house-

holder) such as hotels, banks, churches, restaurants, ete.

For this reason also, appellant cannot claim the benefits of

the exemption contained in Section 13 (a) (2) (Findings

16-19).°

Furthermore, the Administrator has correctly urged that

a producer of goods for interstate commerce cannot, under

any circumstance claim a Section 13(a)(2) exemption.

Thus, in paragraph 17 of Bulletin No. 6, he states as

follows :

“‘On the other hand, an establishment which is en-

gaged in manufacturing operations is not a retail

establishment even though the goods which it manu-

factures are distributed at retail.’’

Finally, in discussing an enterprise which, as here, is en-

gaged in doing a combined or integrated retail and non-

*Cf., to same effect, paragraph 27 of Bulletin No. 6, wherein the

Wage-Hour Administrator states as follows: “As already indicated,

establishments which perform a substantial amount of work for

industrial or business users, government agencies, institutions, and

similar customers may not be considered service establishments. A

service establishment is one which performs service for private

individuals for person or family use.”

22

retail business, the Administrator concludes, in paragraph

41 of his bulletin, as follows:

“If the entire enterprise is consolidated and oper.

ated as a distinct or integrated business unit; if there

is no physical separation whatever between the retail

and non-retail branches of the business; then the ey.

emption does not apply. The enterprise would have

to be treated as a whole and, as such, could not prop.

erly be described as a retail establishment.’’

The court below, while recognizing the existence here

of many of the conditions which the Administrator has

stated would preclude an employer from being properly

classified as a retail establishment within the exemption

(R. 497-498), has, nevertheless, seized upon paragraphs 18

and 28 of Interpretive Bulletin No. 6 as justification for

its judgment of reversal.

As one of the many conditions prescribed for determin-

ing the applicability of the exemption, the Administrator

has stated in those two paragraphs that where more than

75% of an employer’s income is derived from retail sales,

such fact might lay the ground for a 13 (a) (2) exemp-

tion. But it is important to note that this 75% test was

promulgated solely in connection with an employer whose

total business, unlike here, consisted solely and exclusively

in selling or rendering services directly to the ultimate

consumer, but where some of the direct ultimate consumers

were business or commercial firms, or institutions, such as

hotels, restaurants, banks, department stores, etc., as dis-

tinguished from private householders.

The Administrator, however, has never issued such a

test with respect to a completely integrated whoiesale-

retail business such as was carried on by petitioner, nor

with respect to an establishment also engaged, as a regular

and continuous part of its integrated activities, in produc

ing goods for interstate commerce.

23

Obviously, also, the test was never intended to be all ex-

dysive. Interpretive Bulletin No. 6 is a lengthy document

of 23 pages, replete with many tests for determining the

applicability of See. 13 (a) (2). If the 75% test was in-

tended to be the sole and exclusive grounds for granting

or denying the exemption, the interpretive bulletin should

then have contained, perhaps, just two paragraphs. Why,

therefore, should the Administrator have taken the pains,

in his bulletin, to discuss at great length so many other

or conditions, the existence of which, in his opin-

jon, would preclude an employer from being properly

dassified a retail establishment under Sec. 13 (a) (2)?

Surely he never intended that the exemption should be

automatically granted solely upon a showing of the 75%

test prescribed in paragraphs 18 and 28, even if there were

present (as at bar) so many of the other conditions which

he, in the bulletin, believes to be grounds for rejecting a

plea to immunity under this section.

6. The court below unjustifiably gave respondent the bene-

fits of an unusually broad interpretation of Section 13(a)

(2) despite this court’s admonition to the contrary in

A. H. Phillips Co., Inc. v. Walling, 329 U. S. 490.

Beeause of the profound public policy with which the

Act is affected, because of the great evils sought to be

thereby eradicated, and because of the Act’s broad human-

itarian purposes, all exemptions in the Act must be nar-

rowly and strictly construed. (Fleming v. Hawkeye Pearl

Button Co., 113 F. 2d 52; Bowie v. Gonzalez, 117 F. 2d

IL.)

Furthermore, an employer seeking recourse to an ex-

emption under this Act must unmistakably sustain the

burden of proof with regard to every materia. fact upon

which the right to exemption must depend. [Miller Hatch-

eries v. Boyer, 131 F. 2d 283 (C. C. A. 8, 1942); Fleming

v4, B. Kirschbaum Co., 124 F. 2d 567 (C. C. A. 3, 1941) ;

24

Helena Glendale Co. v. Walling, 132 F. 2d 616 (C. CA

8, 1942); Ralph Knight, Inc. v. Mantel, 135 F. 2d 320 (C.

C. A. 8, 1943); Calaf v. Gonzalez, 127 F. 2d 934 (C. C. A

1, 1942) ; Walling v. Reid, 139 F. 2d 323 (C. C. A. 8, 1943);

Schmidtke v. Gonesa, 141 F. 2d 634 (C. C. A. 1, 1944))},

In commenting on the very exemption here involved, this

court, in A. H. Phillips Co. v. Walling, 329 U. S. 490, aptly

stated as follows:

‘‘The Fair Labor Standards Act was designated ‘to

extend the frontiers of social progress’ by ‘insuring

to all our able-bodied working men and women a fair

day’s pay for a fair day’s work’. (Message of the

President to Congress, May 24, 1934.) Any exemption

from such humanitarian and remedial legislation must

therefore be narrowly construed, giving due regard

to the plain meaning of statutory language and th

intent of Congress. To extend an exemption to other

than those plainly and unmistakably within its terms

and spirit is to abuse the interpretive process and to

frustrate the announced will of the people.’’ (Enm-

phasis supplied.)

Despite the foregoing, petitioner respectfully submits

that the court below unjustifiedly gave respondent the

benefits of an unusually broad interpretation of Sec. 13 (a)

(2)

(a) By holding that the nature and character of an

employer’s business operations, together with its

physical set-up, was of no relevancy under this ex-

emption (R. 496-499),

(b) By considering as equally irrelevant the undis-

puted fact that respondent was actually conducting

and operating a large scale, full fledged factory and

industrial enterprise,

(ce) By adopting the 75% test of the Administrator

in paragraphs 18 and 28 of Interpretive Bulletin No.

25

6 as the all exclusive test for determining the ap-

plicability of the exemption, despite the existence of

many other circumstances and conditions set forth by

him in other portions of his bulletin as grounds for

rejecting a claim to the exemption,

(d) When, in aplying the 75% test, it treated as

strictly retail sales the business procured by interior

decorators who were paid commissions therefor. (Such

business represented one-third of the total business

done by respondent—Finding 11, R. 474, 500.)

Surely, there was here sufficient doubt that the factory

or industrial enterprise conducted by respondent, doing

business with customers in three states (Finding 15, R.

415), was the ‘‘small, local retailer which Congress had

in mind’? (A. H. Phillips Co. v. Walling, 329 U. S. 499)

in this section. Surely, also, this is not a case where an

employer should be entitled to the exemption because it

has unmistakably sustained the burden of proof with re-

gard to every material fact upon which its right to the

exemption depends.

CONCLUSION

The writ of certiorari should be granted.

Dated: New York, May 10, 1948.

Max R. Simon,

Counsel for Petitioner.