Chao v. Double JJ Resort

• Court: Court of Appeals for the Sixth Circuit
• Decided: July 9, 2004
• Docket: 02-2068
• Status: Published

Opinion

RECOMMENDED FOR FULL-TEXT PUBLICATION Pursuant to Sixth Circuit Rule 206 2 Chao v. Double JJ Resort Ranch, et al. No. 02-2068 ELECTRONIC CITATION: 2004 FED App. 0220P (6th Cir.) File Name: 04a0220p.06 _________________ COUNSEL UNITED STATES COURT OF APPEALS ARGUED: Mary J. Rieser, UNITED STATES FOR THE SIXTH CIRCUIT DEPARTMENT OF LABOR, Washington, D.C., for _________________ Appellant. Donald A. Van Suilichem, VAN SUILICHEM & ASSOCIATES, Bloomfield Hills, Michigan, for Appellees. ELAINE L. CHAO , Secretary of X ON BRIEF: Mary J. Rieser, Paul Frieden, UNITED Labor, - STATES DEPARTMENT OF LABOR, Washington, D.C., - for Appellant. Donald A. Van Suilichem, VAN SUILICHEM Plaintiff-Appellant, & ASSOCIATES, Bloomfield Hills, Michigan, for Appellees. - No. 02-2068 - v. > _________________ , - OPINION DOUBLE JJ RESORT RANCH , et - _________________ al., - Defendants-Appellees. - BOYCE F. MARTIN, JR., Circuit Judge. Secretary of - Labor, Elaine Chao, asks us to overturn the district court's N grant of summary judgment to Double JJ Resort Ranch, Inc., Appeal from the United States District Court et al. She also asks us to reverse the district court's denial of for the Western District of Michigan at Grand Rapids. her motion for summary judgment. She argues that the No. 01-00141—Robert Holmes Bell, Chief District Judge. district court erred when it found Double JJ to be exempt from the minimum-wage and overtime-pay guarantees of the Argued: March 10, 2004 Fair Labor Standards Act, 29 U.S.C. §§ 206(a), 207(a). We agree in part and REVERSE. Decided and Filed: July 9, 2004 I. Before: MARTIN and CLAY, Circuit Judges; MILLS, Defendants are a group of corporations doing business as District Judge.* Double JJ Resort. Double JJ is a large western-themed resort near Rothbury, Michigan. The resort includes a variety of lodging and dining facilities, a conference center (for up to 250 people), bars, a general store, a gift shop, a gas station, a barbershop, campsites, swimming pools, three lakes, and facilities related to horseback riding. While at Double JJ, resort guests can go canoeing, attend camp fires, shoot * The Hon orable R ichard M ills, United States District Judge for the archery, play shuffleboard, climb walls (for fun and in Central District of Illinois, sitting by designation.

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designated areas), fish, go on hay rides, pet farm animals, or Section 13(a)(3) of the Act provides that the minimum- ride water slides, among other things. There is also a golf wage requirements, 29 U.S.C. § 206, and the overtime-pay course on site, but both parties agree that it is a separate requirements, 29 U.S.C. § 207, are not applicable with respect establishment and is not part of this suit. Guests may to: purchase a "package deal," or they may purchase their food, lodging, and recreational activities separately. The great bulk any employee employed by an establishment which is an of Double JJ's revenue comes from the sale of food, drink, amusement or recreational establishment, organized and lodging, not from the sale of recreational activities. camp, or religious or non-profit educational center, if (A) it does not operate for more than seven months in any Double JJ employs from 300 to 350 employees during the calendar year, or (B) during the preceding calendar year, peak season and about 50 employees in the off-season. its average receipts for any six months of such year were Double JJ earns the bulk of its revenue during the peak not more than 33 1/3 per centum of its average receipts season, serving up to 300 overnight guests each night and an for the other six months of such year, except that the additional 100 daytime visitors. Double JJ pays both hourly exemption from sections 206 and 207 of this title wages and salaries, depending on the employee, but no provided by this paragraph does not apply with any employee is paid overtime, and some employees are paid less respect to any employee of a private entity engaged in than the minimum wage. providing services or facilities (other than, in the case of the exemption from section 206 of this title, a private Secretary Chao brought this enforcement action under entity engaged in providing services and facilities section 17 of the Fair Labor Standards Act of 1938, 29 U.S. directly related to skiing) in a national park or a national C. § 201 et seq., in the United States District Court for the forest, or on land in the National Wildlife Refuge Western District of Michigan. She sought to enjoin Double System, under a contract with the Secretary of the JJ from violating the minimum-wage, overtime, and record- Interior or the Secretary of the Agriculture[.] keeping requirements of the Act. Both parties filed for partial summary judgment. The The Secretary alleged that the since April 4, 1998, and in district court granted the defendants' motion and dismissed violation of 29 U.S.C. § 215, Double JJ: failed to pay covered the case. The court explained: employees at least minimum wage as required by 29 U.S.C. § 206(a); failed to pay covered employees at a rate not less [w]hile a majority of the Double JJ's revenue is from than one and one-half times their regular rate of pay for all food and lodging, only a few guests visit the Double JJ hours worked in a workweek in excess of the first forty, as either for food or lodging. Guests' principal reason for required by 29 U.S.C. § 207(a)(1); and failed to keep records visiting the Double JJ is to participate in recreational of employee wages, hours, and conditions of employment as activities, and food and lodging are secondary to the required by 29 U.S.C. § 211(c). Double JJ responded, principle purpose of enjoying recreational activities. claiming that it had not violated the Act, because it was Hence, the Court finds that on the specific facts of this exempt from the requirements as an "amusement or case, Defendant's principal activity is recreational. recreational facility." Secretary Chao filed this appeal. No. 02-2068 Chao v. Double JJ Resort Ranch, et al. 5 6 Chao v. Double JJ Resort Ranch, et al. No. 02-2068

II. 213(a)(3) test, the Secretary argues that the district court erred in its determination that Double JJ was the type of "Whether employees are within an exemption from the establishment that Congress intended to exempt. We agree. provisions of the [Fair Labor Standards] Act is primarily a question of fact. The District Court's finding of fact cannot be This case centers on the legal definition of the phrase set aside unless they are clearly erroneous." Brennan v. "amusement and recreational establishment" as it is used in 29 Southern Prods., Inc., 513 F.2d 740, 744 (6th Cir. 1975). U.S.C. § 213(a)(3). "When interpreting a statute, this Court However, where, as here, the facts are not in dispute, but the must begin with its plain language, and may resort to a review parties contest the legal application of those facts, we review of congressional intent or legislative history only when the the district court's grant of summary judgment de novo. Paul language of the statute is not clear." Herman v. Fabri- Revere Life Ins. Co. v. Brock, 28 F.3d 551, 553 (6th Cir. Centers of Am., Inc., 308 F.3d 580, 585 (6th Cir. 2002). 1994); see also United States v. Brown, 915 F.2d 219, 223 (6th Cir. 1990) (holding a district court's statutory Double JJ argues that we need go no further than the interpretations will be reviewed de novo). statute's plain language to affirm the district court. In essence, Double JJ claims that there is a common sense It is well settled law in our Circuit that an employer who definition of "recreational establishment" – which apparently claims to be exempt from the requirements of the Fair Labor is being in the "fun business" – and that it clearly qualifies. Standards Act has the burden of proving it qualifies under the While we applaud Double JJ’s appeal to common sense, its terms of a specific exemption. Homemakers Home & Health argument followed to its logical end would allow the Care Servs., Inc. v. Carden, 538 F.2d 98, 101 (6th Cir. 1976). exemption to become the rule. See e.g., Dole v. Mr. W. "[The Act] was designed to eliminate labor conditions Fireworks, Inc., 889 F.2d 543, 546 (5th Cir. 1989) detrimental to the maintenance of the minimum standard of ("permitting every seaside merchant to claim the exemption living necessary for the health, efficiency, and general well- would result in the exemption swallowing the rule"). being of workers." Brock v. Louvers and Dampers, Inc., 817 Arguably, any ice-cream stand or restaurant could qualify F.2d 1255, 1256 (6th Cir. 1987). "[W]ithin the terms of the under Double JJ's proposed interpretation. A boat seller could coverage fashioned by Congress, the Act has been construed claim that it was derivatively a "recreational establishment," liberally to apply to the furthest reaches consistent with given that its sales enable the fun of sailing. It would congressional discretion." Mitchell v. Lublin, McGaughy & certainly not be a laughable claim under Double JJ's Assocs., 358 U.S. 207, 211 (1959). Thus, "exemptions from definition that the boat seller is in the "recreation business." the Act are to be narrowly construed against the party Most businesses sell something -- a thing, a service, a right to asserting them and their application limited to those occupy -- and any number of arguments could be marshaled establishments plainly and unmistakably within their terms to connect the remote sale to something fun. Thus, unlike and spirit." Homemakers, 538 F.2d at 101 (internal citations Double JJ, we do not believe we can end our analysis with a omitted). plain-language interpretation of section 213(a). "Recreational establishment" is an ambiguous phrase. Congress clearly III. meant for there to be a limitation to the exemption, and the words used in the statute do not plainly convey where that Secretary Chao makes one argument on appeal. Conceding boundary lies. that Double JJ meets the "seasonal" requirement of the section No. 02-2068 Chao v. Double JJ Resort Ranch, et al. 7 8 Chao v. Double JJ Resort Ranch, et al. No. 02-2068

The Secretary turns our attention to both the legislative We need not stop with the congressional report, however. history of the Act and the opinions of the Labor Department's Our conclusion finds support in a 1979 opinion letter from the Wage and Hour Administrator to support her argument that Wage and Hour Administrator, which makes clear that: Double JJ is not exempt. "Because [the Department of Labor's] Wage and Hour Administrator is the primary federal hotels, motels and eating places do not have an authority entrusted with determining the [Act's] scope, these amusement or recreational character. Nor do . . . gas interpretations while not controlling upon the courts by reason stations. . . . The fact that these stores are heavily of their authority, do constitute a body of experience and patronized by tourists does not make them recreational or informed judgment to which the courts and litigants may amusement establishments any more than restaurants, properly resort to for guidance." Reich v. Miss Paula's Day retail stores, and similar establishments at a seaside resort Care Ctr., Inc., 37 F.3d 1191, 1194 (6th Cir. 1191) (citations would be considered exempt. omitted). We treat legislative histories similarly. See, e.g., Montgomery v. Huntington Bank, 346 F.3d 693, 699 (6th Cir. 1979 WL 62129. Further, a 1994 Wage and Hour 2003). Administrator opinion, dealing with a dude ranch, explains:

The amusement and recreational establishment exemption [w]hile it appears that your client's operations meet the was originally enacted in 1961. The Senate Committee criteria in section 13(a)(3)(B), it is our opinion that your Report describing the enactment of the exemption reads: client's dude ranch is not an "amusement or recreational establishment" within the section of 13(a)(B) of the [Fair (c) Amusement and recreational establishments operating Labor Standards Act]. It is our opinion that the ranch on a seasonal basis. – A similar exemption without falls within the category of a resort hotel. regard to the annual sales volume of the enterprise, is provided for employees of amusement and recreational 1994 WL 1004822. Combing this persuasive authority, we establishments operating on a seasonal basis. These do not believe that Congress intended to exempt establishments are typically those operated by establishments like Double JJ. concessionaires at amusement parks and beaches for 6 months or less than a year. To clarify, unlike the district court below, we do not think that Double JJ's principal activity is selling recreational S. Rep. No. 145, 87th Cong., 1st Sess., reprinted in 1961 U.S. activities. Instead, Double JJ is a "resort hotel." It offers Code Cong. & Admin. News at 1620, 1647-48; see also recreational activities not because selling recreational Louvers, 817 F.2d at 1257. activities is its primary end, but as a way to get to people to come to a rather remote spot in Michigan to buy food, to rent Reasoning by analogy, we are comfortable with the idea beds, and to have meetings. The Secretary asks that we adopt that Double JJ is not the type of establishment that Congress an "income test" to guide our analysis, but we do not think it intended to exempt. Selling treats at Disneyland is a far cry necessary to do so in this case. The legislative history, the from renting hotel rooms at the Disney Hotel. Riding a roller- Wage and Hour Administrator's opinions, and common sense coaster ride is different than buying dinner and renting a compel our finding that Double JJ is not in the recreation room. One is recreational and the other is a necessity of life. No. 02-2068 Chao v. Double JJ Resort Ranch, et al. 9 10 Chao v. Double JJ Resort Ranch, et al. No. 02-2068

business.1 Its primary purpose is to sell foods and rent beds; F.2d 25 (9th Cir. 1956). Conversely, different ownership the recreational activities are just a carrot enticing people to does not prevent closely integrated departments from make the trip. being treated as a single establishment, e.g. separately owned departments in a department store may belong to IV. one establishment. Our analysis thus far has considered Double JJ to be one Marshall v. New Hampshire Jockey Club, Inc., 562 F.2d establishment. As we noted above, Double JJ does not 1323, 1330 (1st Cir. 1977). Similarly the language defining contest that it has failed to pay its employees the prevailing "establishment" in the regulations accompanying the Act, minimum wage and required overtime pay. Nor does Double albeit not the regulations defining the recreational exemption, JJ contest that it has failed to keep adequate records as set out that "two or more physically separated portions of a required by the Act. Instead, it argues that it was exempt business although located on the same premises and even from the Act's requirements. Having rejected the idea that under the same roof in some circumstances may constitute Double JJ is wholly exempt from the Act's provisions, we are more than one establishment for purposes of exemptions." 29 nonetheless uncomfortable remanding with instructions to C.F.R. § 779.305. Under this authority, Double JJ's facilities enter judgment for Secretary Chao. While we are certain that related to horseback riding, for example, might qualify as a parts of Double JJ are bound by the Act's pay and records separate recreational establishment. Then again, it might not. requirements (for example, the bars, restaurants, dining We simply cannot tell from this record. facilities, conference center, lodging facilities, and gas station), we cannot, on this record, declare that Double JJ is On remand, we believe the test the district court should use one establishment and thus wholly subject to the Act. The in determining which parts of Double JJ qualifies for the Secretary concedes that Double JJ's golf course qualifies as a exemption is set out in 29 C.F.R. § 779.305. See also 1999 separate establishment that is exempt from the Act, and so too WL 1788159 (the opinion of the Wage and Hour may other recreational services offered by Double JJ. Administrator incorporating the regulation's test). The regulation explains that for a recreational service, remotely The First Circuit, in a case involving the definition of connected to a non-qualifying business, to qualify as a "establishment" as used in the amusement and recreational separate establishment it must be: (a) physically separate from establishment exemption, held that: the other activities; (b) functionally operated as a separate unit having separate records and separate bookkeeping; and [s]eparate stores under common ownership may each be (c) have dedicated employees that are not shared between establishments while other aspects of the total operations units. 29 C.F.R. § 779.305. If any of Double JJ's recreational of the same company may be found to be outside the services meet this test, they should be exempt from the Act's pertinent establishment. See Mitchell v. Bekins Van & requirements. Storage Co., 352 U.S. 1027 (1957), summarily rev'g 231 Accordingly, we REVERSE the judgment of the district court and remand for proceedings consistent with this 1 opinion. W ere Do uble JJ situated in a National Park or National Forest our analysis would be different. See 29 U.S.C. § 21 3(a)(3); see also Chessin v. Keystone Resort Mgmt, Inc., 184 F.3d 11 88 (10th Cir. 1999).