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Wickersham Amicus Brief

Nos. 03-35707 and 03-35619
____________________________________________________
____________________________________________________

IN THE UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT

_____________________________________________

JOSEPH C. WICKERSHAM,

Plaintiff-Appellee,

v.

HASELWOOD BUICK-PONTIAC COMPANY,

Defendant-Appellant.

_____________________________________________

On Appeal from the United States District Court
for the Western District of Washington
_____________________________________________

JERRY GIEG,

Plaintiff-Appellee,

v.

DDR, INC.,

Defendant-Appellant.

_____________________________________________

On Appeal from the United States District Court
For the District of Oregon
_____________________________________________

BRIEF FOR THE SECRETARY OF LABOR AS AMICUS CURIAE
_____________________________________________

Respectfully submitted,

HOWARD M. RADZELY
Acting Solicitor of Labor

STEVEN J. MANDEL
Associate Solicitor

PAUL L. FRIEDEN
Counsel for Appellate Litigation

FORD F. NEWMAN
Attorney
U.S. Department of Labor
200 Constitution Ave., N.W.
Room N-2716
Washington, D.C. 20210
(202) 693-5555

TABLE OF CONTENTS

TABLE OF AUTHORITIES

INTEREST OF THE SECRETARY OF LABOR

STATEMENT OF THE ISSUE

STATEMENT OF THE CASE

A.    Statement Of The Facts

B.    The District Court Decisions

C.    The District Courts' Refusal To Reconsider Based On The Administrator's Opinion Letter

SUMMARY OF ARGUMENT

ARGUMENT

SECTION 7(i) DOES NOT REQUIRE THAT EMPLOYEES OF RETAIL ESTABLISHMENTS EARN THEIR COMMISSIONS FROM RETAIL SALES IN ORDER FOR THAT OVERTIME EXEMPTION TO APPLY.

A.    The Secretary's Interpretation Is Compelled By The Plain Language Of Section 207(i).

B.    Case Law Construing Analogous Exemptions Supports The Secretary's Interpretation That Employees Need Not Engage In Retail Sales To Qualify For The Section 7(i) Exemption.

C.    Finance Officers Are Employed Within The Scope Of A Retail Auto Dealership's Exempt Business Consistent With The Secretary's Regulation at 29 C.F.R. 779.308.

D.    The Secretary's Position Does Not Conflict With This Court's Previous Decision In Gieg.

CONCLUSION

CERTIFICATE OF COMPLIANCE

CERTIFICATE OF SERVICE

ADDENDUM

TABLE OF AUTHORITIES

Cases:

Auer v. Robbins, 519 U. S. 452 (1997)

Bennett v. SLT/TAG Inc., et al., CV 02-65 Order (D. Or. May 8, 2003)

Biggs v. Wilson, 1 F.3d 1537 (9th Cir. 1993), cert. denied, 510 U.S. 1081 (1994)

Brennan v. Six Flags Over Georgia, Ltd., 474 F.2d 18, cert. denied, 414 U.S. 827 (1973)

Brennan v. Southern Productions, Inc., 513 F.2d 740 (6th Cir. 1975)

Brennan v. Texas City Dike & Marina, Inc., 492 F.2d 1115 (5th Cir. 1974)

Chaloupka, et al. v. SLT/TAG Inc., et al. (D. Or. May 19, 2003)

Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984)

Christensen v. Harris County, 529 U.S. 576 (2000)

Davis v. Goodman Lumber Co., 133 F.2d 52 (4th Cir. 1943)

Food and Drug Administration v. Brown & Williamson Tobacco Corp., 529 U.S. 120 (2000)

Gibbs v. Montgomery County Agricultural Society, 140 F. Supp.2d835 (S.D. Ohio March 12, 2001)

Gieg v. DDR, Inc., No. Civ. 98-1S63-HA 2003 WL 21087602 (D. Or. 20 OJ)

Gieg v. DDR, Inc., No. Civ. 98-1563-HA (D. Or. June 20, 2003) (Order)

Gieg v. Haworth, 244 F.3d 775 (9th Cir. 2001)

Hamilton v. Tulsa County Public Facilities Authority, 85 F.3d 494 (10th Cir. 1996)

Hertzberg v. Dignity Partners, Inc., 191 F.3d 1076 (9th Cir. 1999)

Madrid v. Gomez, 150 F.3d 1030 (9th Cir. 1998)

Marshall v. New Hampshire Jockey Club, Inc., 562 F.2d 1323 (1st Cir. 1977)

McComb v. Union Stock Yards, 168 F.2d 375 (7th Cir. 1948)

Mitchell v. Gammill, 245 F.2d 207 (5th Cir. 1957)

Mitchell v. Kentucky Finance Co., 359 U.S. 290 (1959)

Skidmore v. Swift & Co., 323 U.S. 134 (1944)

Stahl v. Delicor of Puget Sound, Inc., 148 Wash.2d 876 (Wash. 2003)

Thibodeaux v. Executive Jet International, Inc., 328 F.3d 742 (5th Cir. 2003)

Udall v. Tallman, 380 U.S. 1 (1965)

United States v. Alvarez-Sanchez, 511 U.S. 350 (1994)

United States v. Daas, 198 F. 3d 1167 (9th Cir. 1999), cert. denied', 531 U.S. 999 (2000)

United States ex rel. Barajas V., United States, 258 F. 3 d 1 004 (9th C i r. 2001)

United States v. Mead Corp., 533 U.S. 218 (2001)

Wickersham v. Haselwood Buick-Pontiac Company, No. COl-5557FDB, 2002 WL 32152269 (W.D. Wash. 2002)

Wickersham v. Haselwood Buick-Pontiac Company, No. COl-5557FDB, 2003 WL 22002687 (W.D. Wash. August 11/ 2003)

Wirtz v. Western Compress Co., 330 F.2d 19 (9th Cir. 1964)

Statutes and Regulations:

Fair Labor Standards Act of 1938, as amended, 29 U.S.C. 201 et seq.

29 U.S.C. 203(i)
29 U.S.C. 207(c)
29 U.S.C. 207(i)
29 U.S.C. 213(a)2)
29 U.S.C. 213(b)(2)
29 U.S.C. 213(a)(3)
29 U.S.C. 213(b)(3)
29 U.S.C. 213(b)(10)
29 U.S.C. 213(b)(10)(A)

Code of Federal Regulations

29 C.F.R. 776.20
29 C.F.R. 776.20(b)
29 C.F.R. 779.304(a)
29 C.F.R. 779.305
29 C.F.R. 779.308
29 C.F.R. 779.317
29 C.F.R. 779.416
29 C.F.R. 779.416{c)

Miscellaneous:

Federal Rules of Appellate Procedure, Rule 29 (a)

The Fair Labor Standards Amendments of 1989, Pub. L. No. 101-157, 3(c)(I), 103 Stat. 938 (1989)

Department of Labor and Industries (State of Washington) Employment Standards No. ES.A.I0.2

IN THE UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT

_______________________________________

No. 03-35707
_______________________________________

JOSEPH C. WICKERSHAM,

Plaintiff-Appellee,

v.

HASELWOOD BUICK-PONTIAC COMPANY,

Defendant-Appellant.

_______________________________________

On Appeal from the United States District Court
for the Western District of Washington
_______________________________________

No. 03-35619
_______________________________________

JERRY GIEG,

Plaintiff-Appellee,

v.

DDR, INC.,

Defendant-Appellant.

_______________________________________

On Appeal from the United States District Court
For the District of Oregon
_______________________________________

BRIEF FOR THE SECRETARY OF LABOR AS AMICUS CURIAE
_______________________________________

INTEREST OF THE SECRETARY OF LABOR

    Pursuant to Rule 29(a) of the Federal Rules of Appellate Procedure, the Secretary of Labor ("Secretary") submits this brief as amicus curiae. These cases present a fundamental question of statutory interpretation concerning the applicability of the exemption from the overtime requirements of the Fair Labor Standard Act ("FLSA" or "Act") under section 7(i) of the Act, 29 U.S.C. 207(i). The district court decisions interpreting section 7(i) are directly contrary to the plain meaning of the statute and the position taken by the Administrator, Wage and Hour Division, in an opinion letter issued on March 17, 2003 (copy attached).

STATEMENT OF THE ISSUE

Whether the section 7(i) exemption from FLSA overtime requirements applies to employees of a retail automobile dealership who earn commissions from selling financing agreements and warranties rather than directly from the sale of automobiles.

STATEMENT OF THE CASE

A.    Statement Of The Facts

    Wickersham and Gieg were employed by auto dealerships as finance officers. They each filed suit in federal district court seeking unpaid overtime under the FLSA. The respective defendants, Haselwood Buick-Pontiac Company and DDR, Inc. ("the dealerships"), argued in each case that the plaintiffs were not entitled to overtime because they met all the requirements of the section 7(i) "retail or service establishment" exemption.

    The job duties performed by Wickersham and Gieg ("the finance officers") were basically the same. [1] The dealerships paid the finance officers commissions based upon their sales of financing agreements, extended warranties, insurance contracts, and various dealership-installed after-sale items (e.g., paint and fabric protection packages and alarm systems). These commission sales were completed after a separate sales staff of the dealership had sold the automobiles. The finance officers received no commissions from the sale of the vehicle itself.

    It is undisputed that the dealerships were retail establishments within the meaning of section 7(i), that more than 50 percent of the finance officers' compensation was based on commissions, and that the compensation the finance officers received from these commission sales was at a rate greater than one and one-half times the federal minimum wage.

B.    The District Court Decisions

    Relying upon Mitchell v. Kentucky Finance Co., 359 U.S. 290 (1959), the district court in Wickersham, by decision dated August 16, 2002, determined that because Wickersham did not sell automobiles, but rather sold "financing and insurance contracts," his job duties lacked a retail concept. Based on its conclusion that a finance officer's job duties were outside the scope of the defendant's retail or service operation, the court concluded that Haselwood was not exempt as to plaintiff's activities and therefore must comply with the FLSA's overtime requirements. The court was also of the opinion that finding a finance officer exempt under section 7(i) would be inconsistent with the Ninth Circuit's holding in Gieg v. Howarth, 244 F.3d 775 (2001), that a finance officer does not qualify as an automobile salesman within the overtime exemption at 29 U.S.C. 213(b)(10)(A).

    In Gieg, the district court, by decision dated March 14, 2003, similarly concluded that "invoking the Section 7(i) exemption requires a clear showing that more than half of an employee's compensation represents commissions on retail goods and services, and not all goods and services as long as they are sold by a retail or services establishment, as argued by defendant." 2003 WL 21087602, at *4. The court therefore reasoned that "finance writers for automobile dealerships do not earn commissions on the sales of goods or services, as that phrase is fairly interpreted when evaluating the applicability of the exemption found under 29 U.S.C. 207(i). Since the duties of such employees fall outside the scope of the employers' retail or service business, those employees therefore fall outside of any FLSA exemption that is based upon the employers being a retail or service establishment." Id. at *5.

    In each case, the district court granted summary judgment against the dealership on the finance officer's claim for failure to pay overtime under the FLSA.

C.    The District Courts' Refusal To Reconsider Based On The Administrator's Opinion Letter

    On March 17, 2003, shortly after the district courts had issued their respective decisions, the Administrator of the Wage and Hour Division issued an opinion letter stating that the section 7(i) exemption applies to any employee of a retail or service establishment if at least 50 percent of that employee's compensation represents commissions on sales of goods and services as defined in 29 U.S.C. 203(i) and 29 C.F.R. 776.20 (i.e., "articles or subjects of commerce of any character"), and the employee meets the rate of pay requirement.

    Focusing on the plain language of the statute, the Administrator concluded that it is the nature of the employer's business (as a retail or service establishment), as opposed to the work performed by any individual employee, that determines the applicability of the section 7(i) overtime exemption. Op. Letter, p. 3. Addressing the specific facts presented and referring to the regulation at 29 C.F.R. 779.308, the Administrator stated that the finance and insurance ("F& I") salespeople of a retail automobile dealer are "employed by a retail or service establishment in activities within the scope of the establishment's exempt business." Id. Thus, the Administrator concluded that the section 7(i) exemption applies to F& I personnel of retail automobile dealerships who are commissioned and otherwise meet the requirements of section 7(i). The Administrator also noted that her March 17 opinion is consistent with the advice provided in an April 2, 1982 opinion letter, stating that the section 7(i) exemption may be applicable to F& I employees of retail automobile dealerships.

    The dealerships moved the respective district courts to reconsider their rulings based on the Administrator's March 17, 2003 opinion letter and the Washington State Supreme Court's intervening decision in Stahl v. Delicor of Puget Sound, Inc., 148 Wash.2d 876 (2003). The district courts, after reviewing the parties' additional briefing, summarily declined to reconsider their decisions that section 7(i) is inapplicable to finance officers. Wickersham, 2003 WL 22002687 (W.D. Wash. August 11, 2003) (Order Denying Defendant's Motion for Revision); Gieg, No. 98-1563-HA (D. Or. June 20, 2003) (Order), slip op. at 2. [2]

SUMMARY OF ARGUMENT

    This Court should reverse the decisions of the district courts based on the plain language of section 7(i), which exempts "any employee of a retail or service establishment" whose regular rate of pay exceeds one and one-half times the applicable minimum wage and who earns more than half of his pay from commissions on goods or services. (Emphasis added.) "Goods," as defined in the Secretary's regulations, include the financing and warranty products that the finance officers sold in earning their commissions. See 29 C.F.R. 776.20. Thus, as spelled out in the Administrator's March 17, 2003 opinion letter, finance officers meet all the requirements of section 7(i) and are therefore properly exempt from the FLSA's overtime provisions.

    The Secretary's position is also supported by analogous case law determining the applicability of other exemptions under the FLSA. These cases demonstrate that, if the exemption by its terms applies to an overall establishment, individual employees do not have to perform the same type of work that gave rise to the establishment's exemption in order to fall within the exemption. In other words, the finance officers need not be directly engaged in retail sales in order to be subject to the dealership's "retail or service establishment" exemption under section 7(i).

    This is not to say that the work of the finance officers need not be performed "within the scope" of the establishment's exempt business, as required by 29 C.F.R. 779.308. The finance officers, however, meet this requirement because their work was directly related and integral to the dealerships' retail sales operations as a whole. These are not cases where employees perform separate and distinct business activities, and thus should be deemed to fall outside the scope of the employer's exempt business. The dealerships did not operate, nor were the finance officers engaged in, a business separate and distinct from the dealerships' retail auto sales business.

    Finally, this Court's decision in Gieg v. Howarth, supra, holding that finance officers employed by an auto dealership do not qualify as automobile salesmen under the overtime exemption at 29 C.F.R. 213(b)(10)(A), does not foreclose the applicability of the section 7(i) exemption in this case. Section 7(i) represents a separate exemption with its own distinct requirements that can be met regardless of the applicability of section 13(b)(10)(A).

ARGUMENT

SECTION 7(i) DOES NOT REQUIRE THAT EMPLOYEES OF RETAIL ESTABLISHMENTS EARN THEIR COMMISSIONS FROM RETAIL SALES IN ORDER FOR THAT OVERTIME EXEMPTION TO APPLY.

A.    The Secretary's Interpretation Is Compelled By The Plain Language Of Section 207(i).

    "Statutory interpretation begins with the plain language of the statute." United States ex rel. Barajas v. United States, 258 F.3d 1004, 1010 (9th Cir. 2001) (citing United States v. Alvarez-Sanchez, 511 U.S. 350, 356 (1994)). "It is a well-recognized rule of statutory construction that '[t]he plain meaning of the statute controls, and courts will look no further, unless its application leads to unreasonable or impracticable results.'" United States ex rel. Barajas, 258 F.3d at 1010 (citing United States v. Daas, 198 F.3d 1167, 1174 (9th Cir. 1999),cert.denied, 531 U.S. 999 (2000)). See also Gieg v. Howarth, 244 F.3d 775, 777 (9th Cir. 2001) ("The 'unambiguously expressed intent of Congress' binds us.") (quoting Food and Drug Admin. v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 132 (2000)). See generally Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 842-43 (1984) (stating that courts must first consider "whether Congress has directly spoken to the precise question at issue. If the intent of Congress is clear, that is the end of the matter, for the court, as well as the agency, must give effect to the unambiguously expressed intent of Congress").

    Section 7(i) exempts from the FLSA's overtime requirements "any employee of a retail or service establishment . . . if (1) the regular rate of pay of such employee is in excess of one and one-half times the minimum hourly rate applicable . . . under section 6 [minimum wage], and (2) more than half his compensation for a representative period (not less than one month) represents commissions on goods or services." Thus, as stated in the Administrator's opinion letter, to qualify for the section 7(i) exemption, three conditions must be met:

(1)    the employee must be employed by a retail or service establishment;

(2)    the employee's regular rate of pay must exceed one and one-half times the applicable minimum wage; and

(3)    more than half the employee's total earnings in a representative period must consist of commissions on goods or services.

    The finance officers in both cases meet all the requirements for being considered exempt under section 7(i). Their employers are retail establishments, their rate of pay is greater than one and one-half times the minimum wage, and more than half of their earnings were derived from commissions on "goods" within the meaning of the Act. See 29 C.F.R. 776.20(b) ("[G]oods as defined in the Act are not limited to commercial goods or articles of trade, or indeed, to tangible property, but include articles or subjects of commerce of any character," including such items as "fiscal and other statements and accounts," "ideas," "[i]nsurance policies," "bills of exchange, bills of lading, checks, drafts, negotiable notes and other commercial paper") (internal quotation marks, citations, and footnotes omitted).

    The district courts, however, read into the statute a fourth requirement -- that the employees must earn commissions from the sale of retail goods and services. The courts concluded that, even though the finance officers were employed by a retail establishment, they failed to qualify for the section 7(i) exemption because they earned commissions from the sale of financing and insurance contracts, which are not retail in nature. [3]

    This conclusion is contrary to the plain language of the statute. "The term 'any' is generally used to indicate lack of restrictions or limitations on the term modified." United States ex rel. Barajas, 258 F.3d at 1011. See also Hertzberg v. Dignity Partners, Inc., 191 F.3d 1076, 1080 (9th Cir. 1999) ("According to Webster's Third New Int'l Dictionary (3rd ed. 1986), 'any' means 'one, no matter what one'; 'ALL'; 'one or more discriminately from all those of a kind.' This broad meaning of 'any' has been recognized by this circuit.") (citations omitted); Madrid v. Gomez, 150 F.3d 1030, 1036 (9th Cir. 1998) (the court must accept "the plain meaning of the word 'any.' In its conventional usage, 'any' means 'ALL-used to indicate a maximum or whole.' It certainly does not mean 'some'").

    Applying the statute's plain meaning, the Secretary interprets "any employee," as used in section 7(i), to mean any employee of a retail or service establishment, without any limitations or restrictions other than the conditions specified in the statute (i.e., the employee's rate of pay must exceed one and one-half times the applicable minimum wage and more than half of his earnings must consist of commissions on goods or services). [4] Thus, as the Administrator correctly concluded in her March 17 opinion letter, which is based on the statute's plain meaning, the Act does not require that an employee earn his commissions from the sale of retail goods or services in order for the section 7(i) overtime exemption to apply.

    To the extent that this Court deems it necessary to go beyond the plain text of the statute, it has recognized that the Wage-Hour Administrator's opinion letters, although not in the form of legislative rules promulgated pursuant to specific congressional authorization, are entitled to deference according to their consistency with past opinions and their power to persuade. See Biggs v. Wilson, 1 F.3d 1537, 1543 (9th Cir. 1993), cert. denied, 510 U.S. 1081 (1994). See also United States v. Mead Corp., 533 U.S. 218, 227-28 (2001); Christensen v. Harris County, 529 U.S. 576, 587 (2000). As the Supreme Court stated in Skidmore v. Swift & Co., 323 U.S. 134, 140 (1944), the Secretary's interpretive regulations "constitute a body of experience and informed judgment to which courts and litigants may properly resort for guidance." In considering the appropriate weight to be given a Wage-Hour Administrator's opinion letter, this Court emphasized that "[w]hen faced with a problem of statutory construction, federal courts should show 'great deference to the interpretation given the statute by the officers or agency charged with its enforcement.'" [5] Biggs, 1 F.3d at 1543 (quoting Udall v. Tallman, 380 U.S. 1, 16 (1965)).

    This Court should give the Administrator's March 17 opinion letter "great deference" because it is well reasoned and consistent with the only prior opinion directly addressing this issue. In accordance with the fundamental principles of statutory interpretation, the Administrator properly relied on the plain meaning of the statute. Her opinion was also thoroughly reasoned in that she followed the guidance provided by cases construing similar statutory language in other exemptions provided in the Act. Finally, her opinion is consistent with an Administrator's opinion dated April 2, 1982, stating that the section 7(i) exemption may be applicable to finance officers employed by auto dealerships. See Excerpt of Record, pp. 49-50.

B.    Case Law Construing Analogous Exemptions Supports The Secretary's Interpretation That Employees Need Not Engage In Retail Sales To Qualify For The Section 7(i) Exemption.

    Although we are aware of no cases arising under section 7(i) directly on point, a number of cases determining the applicability of other exemption provisions in the Act, using similar inclusive language, support the Secretary's interpretation. For example, in Hamilton v. Tulsa County Public Facilities Authority, 85 F.3d 494, 497 (10th Cir. 1996), the court, noting that the FLSA specifically exempts from the minimum wage and overtime requirements "any employee employed by an establishment which is an amusement or recreational establishment," 29 U.S.C. 213(a)(3), rejected an argument that maintenance employees of such an establishment were not subject to the exemption because they were not serving in traditional recreational or amusement activities. The court stated, "By its own terms, 213(a)(3) of the FLSA exempts employees employed by amusement or recreational establishments; it does not exempt employees on the basis of the work performed at an amusement or recreational establishment. It is the character of the revenue producing activity which affords the employer the protection of the exemption." 85 F.3d at 497. Accord Gibbs v. Montgomery County Agricultural Society, 140 F. Supp.2d 835, 840, 843-44 (S.D. Ohio 2001). [6] See also Marshall v. New Hampshire Jockey Club, 562 F.2d 1323, 1331 n.4 (1st Cir. 1977) (stating that "[t]he 13(a)(3) exemption turns on the nature of the employer's business, not on the nature of the employee's work"). [7]

    There also is authority supporting this conclusion in case law interpreting section 13(a)(2), 29 U.S.C. 213(a)(2) (subsequently repealed, see n.3 supra), see Mitchell v. Gammill, 245 F.2d 207, 208-09, 211 (5th Cir. 1957) (the section 13(a)(2) "retail and service establishment" exemption applied to all employees, including those who did no retail or service work); and in case law interpreting section 13(b)(2), 29 U.S.C. 213(b)(2), see McComb v. Union Stock Yards, 168 F.2d 375, 377 (7th Cir. 1948) (the section 13(b)(2) "rail carrier" exemption applied to employees of a railroad which owned a stockyard and related businesses, where the employees were responsible for the guarding and care of the livestock, protection of structures, and traffic control; "[t]he employees' exemption does not depend upon the character of the work performed by them").

    The Secretary's interpretation of section 7(i) is also entirely consistent with a recent decision of the Supreme Court of Washington that interpreted a similar state law provision to mean that all employees of a retail and service establishment can be paid pursuant to the "retail sales exemption" regardless of their duties. See Stahl v. Delicor of Puget Sound, Inc., 148 Wash.2d 876, 886 (2003). The court relied in part upon guidance published by the state Department of Labor, stating that "'[i]f the establishment qualifies for the exemption that is, 75 percent of dollar volume is not for resale and is recognized as retail sales or service then all employees whose pay is at least 50 percent comprised from commissions are exempted from the overtime premium . . . whether they work in sales or in other activities.'" Id. at 886-887 (quoting DLI (Department of Labor and Industries) Employment Stds., No. ES.A.10.2, at 1-2) (second emphasis added by court).

C.    Finance Officers Are Employed Within The Scope Of A Retail Auto Dealership's Exempt Business Consistent With The Secretary's Regulation at 29 C.F.R. 779.308.

    The regulation at 29 C.F.R. 779.308, under the general heading "'Establishment' Basis of Exemptions," states that in order for an exemption to apply to a particular employee hired by a retail or service establishment, he "must be employed by his employer in the work of the exempt establishment itself in activities within the scope of its exempt business." In her March 17 opinion letter, the Administrator expressly concluded that F& I salespersons (i.e., finance officers), although not directly engaged in the retail sale of automobiles, are nonetheless employed by the automobile dealership "in activities within the scope of its exempt business" as required by section 779.308.

    In reaching this conclusion, the Administrator noted that "F& I salespeople work along with and as part of the new and/or used car sales departments; are physically located together with those departments; are paid directly by the retail dealership; are employed by retail automobile dealerships; perform all activities within the dealership's physical place of business; and are covered by the same benefits package, policies, and procedures as other dealership employees." Op. letter, p. 3. The Administrator also noted that, "[a]s part of its business, the dealership assists customers in financing and insuring vehicle purchases," but "does not operate a finance company, insurance company, or any other separate business." Id. at 2. She stated that, because F& I salespersons generally work closely with the automobile sales staff (within a single establishment) in completing transactions directly related to the sale of the automobile, such employees "are an integral part of retail automobile dealers." Id. at 3-4. See Gieg, 2003 WL 21087602, at *3 ("[The finance officer's] duties included verifying pertinent information regarding sale deals being made by defendant's sales staff, inputting information into a computer, printing up the necessary bank and Department of Motor Vehicles (DMV) forms, and obtaining the buyer's signature on the paperwork."). See also Gieg v. Howarth, 244 F.3d 775, 777 (9th Cir. 2001) (noting that the work of finance officers, "obtaining financing for customers and offering profitable services," is "ancillary to car sales").

    The district courts, however, concluded that because the finance officers did not engage in retail sales, they were not employed in activities within the scope of the dealerships' exempted retail business. Both courts cited the situation described in Davis v. Goodman Lumber Co., 133 F.2d 52 (4th Cir. 1943), which is also cited in section 779.308, as an example of when an establishment's employee is not employed in the activities within the scope of its exempted business. Davis involved the applicability of the section 13(a)(2) exemption for retail or service establishments to employees of a company primarily engaged in the retail business of selling lumber, but which also engaged to a limited extent in the non-retail manufacture of rollers for cotton mills. The court in Davis held that, because the manufacturing business was "separate and distinct" from the company's retail lumberyard, the exemption did not apply to employees of the company's manufacturing business. 133 F.2d at 54.

    This Court in Wirtz v. Western Compress Co, 330 F.2d 19 (9th Cir. 1964), similarly concluded that the exemption at 29 U.S.C. 207(c) for employers engaged in ginning and compressing cotton (subsequently repealed) did not create an employer exemption which would cover all of the employer's employees, regardless of their actual work. [8] The Court stated that if the defendant compressing company "had caused shoe manufacturing machines to be set up and operated in seasonally unused portions of its building, the fact that the shoemakers were employees of a cotton compressing employer would not put them under their employer's 7(c) exemption from overtime pay, even though they worked at the place of employment where the employer is so (i.e., in the compressing business) engaged." 330 F.2d at 22. On the other hand, the Court acknowledged that the section 7(c) exemption would cover all those employees engaged in "the activities which occur at a compressing plant and which relate to the business of compressing," including "loading, unloading, weighing, sampling, tagging, recording and all the paper work related to the [compressing of cotton]." Id. at 23.

    Unlike the facts in Davis or the hypothetical situation posed in Western Compress, neither dealership here maintained on its premises separate and distinct business operations in which the employees in question were engaged. Like the dealership considered by the Administrator in her opinion letter, these dealerships do "not operate a finance company, insurance company, or any other separate business." Rather, the duties performed by the finance officers were an integral, and integrated, part of the their employer's auto dealership operations as a whole. See McComb, 168 F.2d at 378 (holding that watchmen who guarded their employer's loading and unloading facilities were covered by the overtime exemption provided in 29 U.S.C. 213(b)(2), which exempts certain rail carriers, "because they are employees of an employer engaged in the operation of a railroad terminal, and their duties are intimately related to the operation as a whole"). See also Thibodeaux v. Executive Jet International, Inc., 328 F.3d 742, 754 (5th Cir. 2003) (because plaintiff's duties as a flight attendant for a common carrier are "directly related to air transportation," the "common carrier by air" overtime exemption at 29 U.S.C. 213(b)(3) applies).

    The decision in Mitchell v. Gammill, supra, also supports the conclusion that only work that is truly functionally distinct should fall outside an establishment's exemption. In Gammill, the court considered whether an employer who operated at the same location several retail businesses, as well as a non-retail "poultry processing department," was a retail establishment exempt under 29 U.S.C. 213(a)(2). The Department of Labor argued that "the poultry department was a separate unit not functionally related to the other departments, and that it was a wholesale enterprise subject to the wage and hour provisions of the [FLSA]." 245 F.2d at 210. The court determined that the employer was entitled to the exemption with respect to all of its employees, including those involved in non-retail activities in the poultry processing department, because "[i]n most respects of management [the employer's business] was operated as a unit. It was a single establishment." [9] Id. at 211. See also 29 C.F.R. 779.304(a) (when different departments of a retail or service establishment "are operated as integral parts of a unit, the departmentalized unit taken as a whole ordinarily will be considered to be the establishment contemplated by the exemptions"); 29 C.F.R. 779.305 (two or more physically separated portions of a business located on the same premises may constitute more than one establishment for purposes of exemptions if they are physically separated from the other activities and "distinct and separate from and unrelated to that portion of the business devoted to other activities").

    It is clear that each of the dealerships, including the financing and insurance functions performed by the finance officers, were operated as a single, integrated retail establishment. It therefore follows that all of dealerships' employees, including the finance officers, are exempt if their method and rate of compensation complies with section 7(i).

D.    The Secretary's Position Does Not Conflict With This Court's Previous Decision In Gieg.

    In Gieg v. Howarth, supra, this Court held that an auto dealership employee whose primary duties were selling financing and warranties (i.e., a finance officer) did not qualify as an automobile salesman within the overtime exemption at 29 U.S.C. 213(b)(10)(A). Section 13(b)(10)(A) exempts from the FLSA's overtime requirements:

any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles, trucks, or farm implements, if he is employed by a nonmanufacturing establishment primarily engaged in the business of selling such vehicles or implements to ultimate purchasers.

The district court in Wickersham stated that "[i]t stands to reason then, that an employee of an automobile dealership with virtually the same job duties as in Gieg would disqualify a 'retail or service establishment' from exemption under 207(i). To hold otherwise would create a loophole which would abrogate the Ninth Circuit's opinion by encouraging 'retail and service establishments' to seek avoidance of overtime payments pursuant to 207(i), thereby circumventing the exemption available in 213(b)(10)." 2002 WL 32152269, at *6. However, an examination of the marked differences between the section 7(i) and section 13(b)(10) exemptions demonstrates that the district court's statement has no merit.

    In her March 17 opinion letter, the Administrator reaffirmed her position that section 13(b)(10)(A) does not apply to F& I salespersons, because they are not automobile salesmen, partsmen, or mechanics. She also noted that section 7(i) provides a separate exemption with distinct requirements. Whereas section 13(b)(10)(A) focuses on three specific types of employees in the vehicle sales industry, section 7(i) more broadly provides an exemption for any employee of a retail or service establishment who satisfies certain compensation requirements. Unlike section 13(b)(10)(A), section 7(i) requires that employees be compensated on a commission basis or at a rate greater than one and one-half times the minimum wage in order to be exempt.

    Thus, according to their terms, one of these statutory provisions may exempt a particular employee, while the other may not. As relevant to this case, although the auto dealership finance officers are ineligible for exemption under section 13(b)(10)(A), they can be exempt under section 7(i) where they meet certain compensation requirements. Such a result is compelled by the distinct requirements of each exemption. Congress would not have intended, without expressly stating, that failure to meet the section 13(b)(10)(A) exemption necessarily means an inability to meet the distinct exemption under section 7(i). Thus, the Administrator's opinion that section 7(i) may, under certain circumstances, apply to F& I salespersons employed by auto dealerships does not conflict with this Court's decision in Gieg.

    This point is buttressed by the district court's decision in Gieg v. DDR, Inc., in which the court permitted the defendant auto dealership to "renew an argument" based upon the applicability of section 7(i), following a remand resulting from this Court's determination in Gieg that section 13(b)(10)(A) does not apply to finance officers. 2003 WL 21087602, at *1. The district court stated that "[t]he exemption described by 29 U.S.C. 207(i) was addressed by the parties on appeal before the Ninth Circuit, but in its remand the Court of Appeals provided no guidance regarding the possible applicability of the exemption in this case." [10] Id. The district court aptly saw no inconsistency in considering the applicability of section 7(i) to F& I personnel following this Court's determination that section 13(b)(10)(A) does not apply to such employees.

CONCLUSION

    For the foregoing reasons, the district court decisions granting summary judgment against the dealerships on the finance officers' claims for failure to pay overtime in violation of the FLSA should be reversed.

Respectfully submitted,

HOWARD M. RADZELY
Acting Solicitor of Labor

STEVEN J. MANDEL
Associate Solicitor

PAUL L. FRIEDEN
Counsel for Appellate Litigation

___signed__________
FORD F. NEWMAN
Attorney

U.S. Department of Labor
200 Constitution Ave., N.W.
Room N-2716
Washington, D.C. 20210
(202) 693-5555

CERTIFICATE OF COMPLIANCE

    Pursuant to Federal Rule of Appellate Procedure 29 (c)(5) and 32(a)(7)(C), I certify that this brief has been prepared using the following monospaced typeface B Microsoft Word, Courier New, 12 point. Exclusive of the table of contents, table of authorities, certificate of compliance, certificate of service, and addenda, this brief contains 4,945 words.

DATE: Nov. 24, 2003

___signed__________
FORD F. NEWMAN

CERTIFICATE OF SERVICE

    I certify that on November 24, 2003, I sent true and correct copies of the Brief for the Secretary of Labor as Amicus Curiae by Regular Mail to:

James Dana Finney, Esq.
Bailey Pinney & Associates
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Jacqueline L. Koch, Esq.
Koch & Deering
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Fisher & Phillips LLP
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Action Employment Law
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___signed______
Ford F. Newman
Attorney


Footnotes

[1]    Wickersham's job was termed "Finance Manager"; Gieg's job title was "Finance Writer." For a more detailed description of their respective job duties, see Wickersham v. Haselwood Buick-Pontiac Company, No. C01-5557FDB, 2002 WL 32152269, at *1 (W.D. Wash. 2002); Gieg v. DDR, Inc., No. Civ. 98-1563-HA, 2003 WL 21087602, at *3 (D. Or. 2003).

[2]    Two other district court judges sitting in the Ninth Circuit have similarly declined to follow the Administrator's March 17 opinion letter regarding the applicability of section 7(i) to finance officers employed by auto dealerships. See Bennett v. SLT/TAG Inc., et al., CV 02-65 Order (D. Or. May 8, 2003); Chaloupka, et al. v. SLT/TAG Inc., et al. CV 02-743 (D. Or. May 19, 2003). None of the courts in these cases had the benefit of the Secretary's views as amicus, nor did any directly address the plain language argument put forth by the Secretary in this brief.

[3]    Both district courts relied upon Mitchell v. Kentucky Finance Co., supra, in which the Supreme Court held that a company that engaged in the business of making personal loans and in purchasing conditional sales contracts from dealers in furniture and appliances lacked a "retail concept" and, therefore, was not a "retail or service establishment" within the meaning of 29 U.S.C. 213(a)(2) (repealed, Pub. L. 101-157, 3(c)(1), 103 Stat. 939 (Nov. 17, 1989)). 359 U.S. at 295. See also 29 C.F.R. 779.317 (listing finance companies and insurance agencies as establishments that lack a "retail concept"). Kentucky Finance Co. is inapposite because that case addresses what is a retail or service establishment, while under section 7(i) the relevant question is whether employees who work for such an establishment are exempt from the overtime requirements of the Act. It is not in dispute that the auto dealerships here are retail establishments.

[4]    The Secretary's regulations, consistent with the statute, require that a commission plan must be bona fide in order for the section 7(i) exemption to apply. See 29 C.F.R. 779.416. For example, "[a] commission rate is not bona fide if the formula for computing the commissions is such that the employee, in fact, always or almost always earns the same fixed amount of compensation for each workweek." 29 C.F.R. 779.416(c).

[5]    The court in Chaloupka, supra, raised questions concerning the process by which the March 17 opinion letter was issued, stating that it appears that the letter was "generated for purposes of this litigation." Opinion and Order (July 21, 2003), slip op. at 3. The opinion letter was issued in response to a request made by the National Automobile Dealership Association ("NADA"). While the defendant dealerships in the above-captioned cases, as well as those in other cases arising in the Ninth Circuit (see note 2, supra), may be members of the NADA, NADA is not a party in these cases, and the Department was in no way prohibited from issuing the March 17 opinion letter to set forth its position on this important issue. Furthermore, there is nothing in the court's discussion of the manner in which the letter was procured to indicate that the opinion itself is unsound and unworthy of deference. Finally, notwithstanding the Chaloupka court's insinuations to the contrary, the Administrator did indeed draft the March 17 opinion letter without any direct assistance from outside parties, a point that is reinforced by that letter's consistency with the April 2, 1982 Wage-Hour Administrator opinion letter mentioned above. Cf. Auer v. Robbins, 519 U.S. 452, 462 (1997) ("There is simply no reason to suspect that the interpretation [put forward in an amicus brief] does not reflect the agency's fair and considered judgment on the matter in question.").

[6]    In Gibbs, the court noted that the Fifth Circuit had reached a contrary result in Brennan v. Six Flags Over Georgia, Ltd., 474 F.2d 18, 19, cert. denied, 414 U.S. 827 (1973). The court in Gibbs, however, specifically declined to follow Six Flags, noting that "the Fifth Circuit reached a contrary conclusion just one year later in Brennan v. Texas City Dike & Marina, Inc., 492 F.2d 1115, 1119 (5th Cir. 1974), concluding that an employer's 'principal activity should be determinative of [its] eligibility for an exemption.'" 140 F. Supp.2d at 843-44. The district court in Gibbs also noted that the position taken in Hamilton and Texas City is consistent with that taken by the Sixth Circuit in Brennan v. Southern Productions, Inc., 513 F.2d 740, 746-47 (6th Cir. 1975) (looking to the "principal activity of the [employer]" when determining the applicability of the section 13(a)(3) exemption).

[7]    The First Circuit also specifically declined to follow Six Flags. 562 F.2d at 1331 n.4.

[8]    In the words of the Court, "The argument that the 7(c) exemption is an employer exemption, applicable to all employees of such an employer no matter what the particular employees work at or whether the work has any relation to the kind of activity which caused Congress to create the exemption, can be overstretched beyond the breaking point." Western Compress, 330 F.2d at 22.

[9]    The court noted that, even though a majority of the sales of the poultry department was made to hotels and restaurants, some of the poultry was cooked and served at the company's restaurant and barbecue stand; some was sold at the company's grocery and market; and some was sold directly to individuals for consumption at large parties. 245 F.2d at 209.

[10]    This Court did not discuss section 7(i) in its decision in Gieg v. Howarth.