1. Provisions of the Fair Labor Standards Act granting
exemptions from the operation of the Act are to be narrowly
construed. P.
324 U. S.
493.
Page 324 U. S. 491
2. Section 13(a)(2) of the Fair Labor Standards Act, exempting
from the operation of the Act employees "engaged in any retail . .
. establishment,"
held inapplicable to warehouse and
central office employee of an interstate retail chain store system.
P.
324 U. S.
493.
144 F.2d 102 affirmed.
Certiorari, 323 U.S. 704, to review the affirmance of a decree,
50 F. Supp. 749, enjoining the petitioner from violating the Fair
Labor Standards Act.
MR. JUSTICE MURPHY delivered the opinion of the Court.
Section 13(a)(2) of the Fair Labor Standards Act of 1938, 52
Stat. 1060, 1067, 29 U.S.C. ยง 213(a)(2), states that the wage and
hour provisions of the Act shall not apply with respect to "any
employee engaged in any retail or service establishment the greater
part of whose selling or servicing is in intrastate commerce." The
issue posed by this case is whether employees working in the
warehouse and central office of an interstate grocery chain store
system are "engaged in any retail . . . establishment" within the
meaning of Section 13(a)(2) so as to be exempt from the wage and
hour provisions.
The petitioner corporation operates a chain of 49 retail grocery
stores in cities and towns within a 35-mile radius from
Springfield, Massachusetts. Of these stores, 40 are in
Massachusetts and 9 are in Connecticut. Quite apart from
Page 324 U. S. 492
these retail stores, petitioner maintains a separate warehouse
and office building in Springfield in which work the employees
involved in this case.
The warehouse is the only one maintained by petitioner, and it
services all the 49 stores. Except for bread, pastry and milk,
which are secured from local sources, all of petitioner's
merchandise is delivered by rail and truck to the warehouse, where
it is divided and then delivered by petitioner's trucks to the
individual stores according to need. About 80% of the merchandise
passing through the warehouse is received from outside
Massachusetts, while about 18% of the total sales by dollar volume
of the merchandise shipped from this warehouse is accounted for by
petitioner's Connecticut stores. Each week, a regular order is
delivered to each store from the warehouse, and additional
deliveries are made as required. Merchandise is supplied on the
basis of requisitions prepared by individual store managers,
subject to revision by one of the three superintendents in the
central office. All of petitioner's sales are made exclusively at
the retail stores, and no deliveries to customers are made from the
warehouse.
Employees in the central office, which is located in the same
building as the warehouse, perform the usual functions of checking
invoices, paying bills, making out payrolls, keeping inventory
records, checking store deliveries, and the like. The various
employees in the warehouse and the truck drivers handle the
physical work connected with the receipt, storage, and shipment of
merchandise. None of these employees segregates his time as between
interstate and intrastate shipments; both types of shipments are
handled indiscriminately to and from the warehouse.
On the basis of these facts, the Administrator of the Wage and
Hour Division sought to enjoin petitioner from violating the
overtime and record provisions of the Act. The District Court
granted the injunction, holding (1)
Page 324 U. S. 493
that the warehouse and central office employees were engaged in
interstate commerce within the meaning of the Act, and (2) that
they were not exempted from the wage and hour provisions by reason
of Section 13(a)(2), since the warehouse and office building did
not constitute a retail establishment. 50 F. Supp. 749. The First
Circuit Court of Appeals affirmed as to both points. 144 F.2d 102.
Petitioner, however, has sought review here only as to the second
point. And certiorari was granted because of the conflicting views
expressed on this issue by lower appellate courts. [
Footnote 1]
The Fair Labor Standards Act was designed "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 the intent of Congress. To extend an
exemption to other than those plainly and unmistakably within its
terms and spirit is to abuse the interpretative process and to
frustrate the announced will of the people. We accordingly agree
with the two courts below that the exemption contained in Section
13(a)(2) is inapplicable in this case, and that the employees
involved are entitled to the benefits of the wage and hour
provisions of the Act. We hold, in other words, that the warehouse
and central office of petitioner's chain store system cannot
properly be considered a retail establishment within the meaning of
Section 13(a)(2).
Page 324 U. S. 494
It is necessary, in the first place, to understand the true
nature of petitioner's warehouse and office. The prime function of
petitioner's chain store system is to sell groceries at retail.
Like most large chains, however, petitioner has found it
economically feasible to perform and integrate both the retail and
wholesale functions of the grocery business. The independent
wholesaler or middleman has been eliminated from the channel of
distribution of petitioner's merchandise. Petitioner not only
operates the retail outlets, but purchases the merchandise in
quantity from producers, stores it in a warehouse, and
systematically allots it to the individual stores. Certain
economics in operation result from this direct mass buying and
centralized merchandising control which would otherwise be
impossible to achieve. [
Footnote
2] A warehouse and a central office such as petitioner
maintains are vital factors in this integration of the retail and
wholesale functions. They are necessary instruments for the
successful performance of the wholesale aspects of a multi-function
business of this type.
There are, to be sure, certain distinctions between the
wholesale activities of a chain store system and those of an
independent wholesaler. Thus, a chain store enterprise does not
customarily sell merchandise in its warehouse to retailers or other
wholesale customers, as does an independent wholesaler. [
Footnote 3] The goods stored in a chain
store warehouse are merely distributed, rather than sold, to the
retail stores.
See Louis K. Liggett Co. v. Lee,
288 U. S. 517,
288 U. S.
537-538. But this and other differences that can be
found arise from the fact that the chain organizations have
completely
Page 324 U. S. 495
meshed the retail and wholesale functions. Many of the costs and
risks normally assumed by the wholesale merchant because of his
independent and competitive nature are eliminated by the chain
store organization. The resulting savings and simplifications serve
only to emphasize some of the major effects of the apparent trend
away from the independent middleman in our economy of distribution.
[
Footnote 4] The disappearance
of the independent middleman, together with many of his separate
operations and charges, does not mean, however, that his essential
intermediary or wholesale function of moving goods from producer to
retailer has been abolished. In this instance, it has only been
taken over by the retailer, acting through its own distinct
wholesale units. [
Footnote
5]
In a realistic sense, therefore, most chain store organizations
are merchandising institutions of a hybrid retail-wholesale nature.
They possess the essential characteristics of both the retailer and
the wholesaler. Their wholesale functions, which are integrated
with, but are physically distinct from, their retail functions, are
performed through their warehouses and central offices. That
Page 324 U. S. 496
fact is the essential key to the problem presented by this case.
It serves to make clear the inapplicability of Section 13(a)(2) to
petitioner's warehouse and central office employees.
Section 13(a)(2), by its very terms, exempts only those
employees engaged in a retail or service establishment operating
primarily in local commerce. Petitioner claims that its retail
stores, warehouse, and central office together constitute a "retail
establishment" within the meaning of this exemption. The lack of
merit in this claim is obvious. Even if, as petitioner urges, the
word "establishment" referred to an entire business or enterprise,
the combined retail-wholesale nature of petitioner's interstate
business would prevent it from properly being classified as a local
"retail establishment." But if, as we believe, Congress used the
word "establishment" as it is normally used in business and in
government [
Footnote 6] -- as
meaning a distinct physical place of business -- petitioner's
enterprise is composed of 49 retail establishments and a single
wholesale establishment. Since the employees in question work in
the wholesale establishment, Section 13(a)(2) is plainly
irrelevant.
Moreover, it is quite apparent from the sparse legislative
history of Section 13(a)(2) that Congress did not intend to exempt
as a "retail establishment" the warehouse
Page 324 U. S. 497
and central office of an interstate chain store system. From the
standpoint of its legislative ancestry, Section 13(a)(2) is the
offspring of a manifest desire 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., 1st 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 store.
[
Footnote 7] It felt that
retail concerns of this nature do not sufficiently influence the
stream of interstate commerce to warrant imposing the wage and hour
requirements on them.
Ibid, p. 5. Section 13(a)(2) is a
part of the Act only because of the fear that Section 13(a)(1), in
exempting employees regularly engaged in a "local retailing
capacity," did not clearly exclude those employed by local
retailers who are situated near state lines and who make occasional
interstate sales.
Walling v. Jacksonville Paper Co.,
317 U. S. 564,
317 U. S.
571.
Here, petitioner's warehouse and central office employees are
performing wholesale duties in the very midst of the stream of
interstate commerce. They constantly deal with both incoming and
outgoing interstate shipments.
Page 324 U. S. 498
Such tasks are completely unlike those pursued by employees of
the small local retailers, who were the sole concern of Congress in
Section 13(a)(2). These duties, rather, are economically,
functionally, and physically like those of the independent
wholesaler's employees who, when engaged in interstate commerce,
are admittedly entitled to the benefits of the Act. We fail to
perceive in Section 13(a)(2) or in its Congressional background any
intent to discriminate against chain store employees engaged in
wholesale activities, or to give to chain store warehouses a
competitive advantage in labor costs over independent
wholesalers.
We are thus unable to say that the warehouse and central office
employees of petitioner's interstate chain store system plainly and
unmistakably fall within either the terms or the spirit of the
exemption specified in Section 13(a)(2). Economic facts, legal
principles, and consistent and thorough administrative
interpretation [
Footnote 8] of
the exemption all compel the conclusion that Section 13(a)(2) is
not applicable to the facts of this case. We therefore affirm the
judgment of the court below.
Affirmed.
THE CHIEF JUSTICE, MR. JUSTICE FRANKFURTER and MR. JUSTICE
JACKSON concur in the result.
MR. JUSTICE ROBERTS dissents.
[
Footnote 1]
The decision below in this case is in accord with the reasoning
of
Walling v. American Stores Co., 133 F.2d 840, but is in
conflict with
Allesandro v. C. F. Smith Co., 136 F.2d 75;
Walling v. L. Wiemann Co., 138 F.2d 602, and
Walling
v. Block, 139 F.2d 268.
[
Footnote 2]
See Beckman and Nolen, The Chain Store Problem (1938),
pp. 48-50.
[
Footnote 3]
Although petitioner's warehouse apparently does no wholesale
business with independent retailers, many chain store warehouses
sell certain quantities of merchandise to outside retailers in
addition to supplying their own retail outlets. Beckman and Nolen,
The Chain Store Problem (1938) p. 8.
[
Footnote 4]
Does Distribution Cost Too Much?, Twentieth Century Fund (1939),
pp. 81-85, 100, 110, 178-181, 345, 346; Beckman and Nolen, The
Chain Store Problem (1938), pp. 7-9, 42-61; 15 Encyclopaedia of the
Social Sciences (1935), pp. 411-416.
[
Footnote 5]
"While it is frequently said that the function of wholesaling is
vital, even though the wholesaler may not be in every line, some
amplification of this remark seems advisable. Some agency must
provide the machinery to move all merchandise from the producer to
the retailer. Regardless of what this function is called, it is
essentially the same as wholesaling. . . . Chain stores, once they
assume enough importance to justify a warehouse, are engaged in
wholesaling, as well as retailing. Whatever goods are handled at
retail outlets must be bought in quantity, handled in the
warehouse, and allotted to the individual stores in much the same
way that wholesalers would serve the independent dealers."
Chamber of Commerce of the United States, National Wholesale
Conference, Report of Committee I, Wholesalers' Functions and
Services (1929), pp. 13, 14.
[
Footnote 6]
Prior to the adoption of the Fair Labor Standards Act, the term
"establishment" was used in the sense of physical place of business
by many census reports, business analyses, administrative
regulations, and state taxing and regulatory statutes. As applied
to chain store systems, "establishment" thus described each unit in
the chain. For example, under the N.R.A.Codes of Fair Competition,
prepared by committees from the industries concerned, retail stores
of a grocery chain were subject to the Retail Food and Grocery
Trade Code, while the chain store warehouses and central offices
were treated as separate "establishments" subject to the Wholesale
Food and Grocery Trade Code.
See N.R.A.Codes of Fair
Competition, Vol. IV, pp. 460, 461, 470, and Vol. V, pp. 5, 6, 13,
14.
[
Footnote 7]
The original language of Section 13(a)(2), introduced as an
amendment by Representative Celler, applied 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 grocery store man or the filling station man" and "the
local groceryman, druggist, 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 "establishment," rather than
"industry." The use of the word "establishment" is more appropriate
to the small local retailers which Congress had in mind, and
clearly indicates that Congress meant by it something less or
different than "industry" or "enterprise."
[
Footnote 8]
See Interpretative Bulletin No. 6, United States
Department of Labor, Wage and Hour Division, originally issued in
December, 1938, and revised in June, 1941.
See also First
Annual Report of the Administrator of the Wage and Hour Division,
United States Department of Labor (1940), p. 21, informing Congress
that
"each physically separated store of a chain of stores will be
considered a separate 'retail establishment.' The warehouses and
central executive offices of the chain are not 'retail
establishments.'"