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ume of sales of such enterprise is not more $1,000,000 exclusive of excise taxes, and (B) more than 75 per centum of such enterprise's annual dollar volume of sales is made within the State in which such enterprise is located, and (C) not more than 25 per centum of the annual dollar volume of sales of such enterprise is to customers who are engaged in the bulk distribution of such products for resale.
See Addison v. Holly Hill, 322 U.S. 607; Maneja v. Waialua, 349 U.S. 254; Phillips v. Walling, 331 U.S. 490; Arnold v. Kanowsky, 361 U.S. 388; Mitchell v. Kentucky Finance Co., 359 U.S. 290; Walling v. General Industries Co., 330 U.S. 545.
Section 794.101 Intended scope of exemption.
Under section 13(b) (10) of the Act, the intent of the exemption must be given effect in determining the scope of its application to an enterprise and to the employees of an enterprise. The statutory language must be applied to the facts in a manner consistent with the purpose of the exemption as evidenced by its legislative history. This purpose is to relieve the described enterprise from the application of the Act's overtime pay requirements to employment in their activities of distributing petroleum products. Such employment was stated to be affected by climatic, seasonal, and other pertinent factors characteristic of business operations in the distribution of such products. (See, in this connection, the following documents of the 87th Cong., 1st sess.: H. Rept. No. 75, pp. 26, 27,36; 105 Congressional Record (daily edition) p. 4519; S. Rept. No. 145, pp. 37, 50; H. Rept. No. 327, p. 18; Hearings before Senate Subcommittee on Labor on S. 256, S. 879, and S. 895, at pp. 411421; Hearings before House Special Subcommittee on Labor on H.R. 3935, at pp. 422-425 and 627629.)
Section 794.103 Dependence of exemption on
engagement in described distribution. By its terms, section 13(b) (10) provides an overtime pay exemption for "any employee of an *** enterprise *** engaged in the wholesale or bulk distribution of petroleum products Thus, engagement in the described distribution is an “explicit prerequisite to exemption” (Arnold v. Kanowsky, 361 U.S. 388), as are the other express conditions set forth in the section. A natural reading of the statutory language suggests that the employee as well as the enterprise must be so engaged in order for the exemption to apply (see Porto Rico Light Co. v. Mor, 253 U.S. 315). To the extent that its employees are engaged in the described distribution, the enterprise is itself so engaged (see Kirschbaum v. Walling, 316 U.S. 517; and see section 794.104). Also, whenever an enterprise is so engaged, any of its employees will be considered to be an "employee of an *** enterprise *** engaged in the wholesale or bulk distribution of petroleum products” if the duties of his employment require him to perform any operations or provide any services in carrying on such activities of his employer, and if the employee is not engaged for a substantial portion of his workweek in other activities which do not provide a basis for exemption under section 13(b) (10). Such an interpretation of the quoted language is believed necessary to give effect to the intended scope of the exemption as explained in section 794.101. Where an enterprise is exclusively engaged in the wholesale or bulk distribution of petroleum products and meets all the other requirements of section 13(b) (10), all of its employees will be exempt from the overtime pay requirements of the Act under the principles stated above. The application of these principles to enterprises which are not exclusively so engaged will now be considered.
Section 794.102 Guides for construing exemp
It is judicially settled that “The details with which the exemptions in this Act have been made preclude their enlargement by implication” and “no matter how broad the exemption, it is meant to apply only to" the employment specified in the statute. Conditions specified in the language of the Act are "explicit prerequisites to exemption.” Accordingly, it is the well-established rule that exemptions from the Act "are to be narowly construed against the employer seeking to assert them” and their application is limited to those who come “plainly and unmistakably within their terms and spirit." An employer who claims such an exemption has the burden of showing that it applies.
Section 794.104 Enterprises engaged in de
scribed distribution and in other activities. An enterprise may be engaged in the wholesale or bulk distribution of petroleum products, within
133 F. 2d 52'; Fleming v. Swift & Co., 41 F. Supp. 825, affd 131 F.2d 249.
the meaning of section 13(b) (10), without being exclusively so engaged. Such engagement may be only one of the several related activities, performed through unified operation or common control for a common business purpose, which constitute the enterprise under section 3(r) of the Act. If engaging in such distribution is a regular and significant part of its business, an enterprise which meets the other tests for exemption under section 13(b) (10) will be relieved of overtime pay obligations with respect to employment of its employees in such distribution activities, in accordance with the intended scope (see section 794.101) of the exemption. There is no requirement that engaging in such activities constitute any particular percentage of the enterprise's business. However, in the case of an enterprise engaged in other activities as well as in the wholesale or bulk distribution of petroleum products, an employee employed in such other activities of the enterprise is not engaged in employment which the exemption was intended to reach (see section 794.101). Such an employee is not brought within the exemption by virtue of the fact that the enterprise by which he is employed is engaged with other employees in the distribution activities described in section 13(b) (10). This accords with the judicial construction of other exemptions in the Act which are similarly worded. See Connecticut Co. v. Walling, 154 F. 2d 522, certiorari denied, 329 U.S. 667; Northwest Airlines v. Jackson, 185 F. 2d 74; Davis v. Goodman Lumber Co.,
Section 794.105 Other requirements for ex
emption. The overtime pay exemption provided by section 13(b) (10) applies to "any employee of an *** enterprise * * *
*** engaged in the wholesale or bulk distribution of petroleum products" as explained in sections 794.103 to 794.104 if the enterprise which employs him meets all of the following requirements: (a) It is a "local" enterprise; (b) it is “independently owned and controlled”; (c) it has an annual gross volume of sales of not more than $1,000,000 exclusive of excise taxes; (d) it makes more than 75 percent of its annual dollar volume of sales within the State in which it is located; and (e) not more than 25 percent of such annual dollar volume of sales is to customers who are engaged in the bulk distribution of petroleum products for resale. In order to determine whether all these requirements are met, it is necessary to know what constitutes the "enterprise" to which reference is made, the meaning of "the wholesale or bulk distribution of petroleum products” in which engagement is required as a prerequisite to exemption, what is meant by a “local” enterprise and what characterizes it as “independently owned and controlled", and the criteria for application of the dollar volume tests. These matters will be discussed in some detail in the sections following.
Section 794.106 Statutory definition of enter
prise. Section 3(r) of the Act defines enterprise as follows:
limited to, an agreement (1) that it will sell, or sell only, certain goods specified by a particular manufacturer, distributor, or advertiser, or (2) that it will join with other such establishments in the same industry for the purpose of collective purchasing, or (3) that it will have the exclusive right to sell the goods or use the brand name of a manufacturer, distributor, or advertiser within a specified area, or by reason of the fact that it occupies premises leased to it by a person who also leases premises to other retail or service establishments.
Enterprise means the related activities performed (either through unified operation or common control) by any person or persons for a common business purpose, and includes all such activities whether performed in one or more establishments or by one or more corporate or other organizational units including departments of an establishment operated through leasing arrangements, but shall not include the related activities performed for such enterprise by an independent contractor : Provided, That within the meaning of this subsection, a retail or service establishment which is under independent ownership shall not be deemed to be so operated or controlled as to be other than a separate and distinct enterprise by reason of any arrangement, which includes, but is not necessarily
Section 794.107 Establishment distinguished.
The “enterprise" referred to in the section 13(b) (10) exemption is to be distinguished from an "establishment”. As used in the Act, the term "establishment”, which is not specially defined therein, refers to a "distinct physical place of business" rather than to "an entire business or
enterprise” which may include several separate places of business. (See Phillips v. Walling, 324 U.S. 490; Mitchell v. Bekins Van & Storage Co., 352 U.S. 1027; 95 Congressional Record 12505, 12579, 14877; H. Rept. No. 1453, 81st Cong., 1st sess., p. 25.) It will be noted from the definition of "enterprise" in section 3(r), as set forth in section 794.106, that the activities of the enterprise may be "performed in one or more establishments", and section 13(b) (10) specifies that the enterprises to which its exemption requirements are applicable will include "an enterprise with more than one bulk storage establishment." Section 794.108 Scope of enterprise must be
known before exemption tests can be
applied. The scope of the "enterprise” as defined by section 3(r) of the Act must be ascertained before it is possible to apply the tests for exemption contained in section 13(b) (10) which are based on the dollar volume of sales of the "enterprise”. The activities included in the enterprise must be known, and any activities not a part of the enterprise must be excluded, before the dollar volume of sales derived from the activities of the enterprise can be computed. Section 794.109 Statutory basis for inclusion
of activities in enterprise. The "enterprise”, for purposes of enterprise coverage under section 3(s) and the exemption provision in section 13(b) (10), is defined in section 3(r) (section 794.106) in terms of the activities in which it is engaged. All the “related activities” which are “performed * * * by any person or persons for a common business purpose" are included if they are performed “either through unified operation or common control.” This is true even if they are performed by more than one person, or in more than one establishment, or by more than one corporate or other organizational unit. The definition specifically includes as a part of the enterprise, departments of an establishment operated through leasing arrangements. These statutory criteria are discussed in more detail in subsequent sections. Section 794.110 Activities excluded from the
"enterprise" by the statute. The circumstances under which certain activities will be excluded from the "enterprise” referred
to in the Act are made clear by the definition quoted in section 794.106. The definition distinguishes between the related activities performed through unified operation and common control for a common business purpose by the participants in the enterprise, and activities which are related to these activities but are performed for the enterprise by a bona fide independent contractor (for example, an independent accounting or auditing firm). The latter activities are expressly excluded from the "enterprise" as defined. In addition, the definition contains a proviso detailing certain circumstances under which a retail or service establishment under independent ownership will not lose its status as a separate and distinct enterprise by reason of certain franchise and other arrangements which it may enter into with others. This proviso, the effect of which is more fully explained in sections 779.226 through 779.229 of this chapter, dealing with the application of the Act to retailers, may be important to wholesale or bulk distributors of petroleum products in determining whether the effect of particular arrangements which they may make with retailers of their products will be to include activities of the latter with their own activities in the same enterprise for purposes of the Act. Section 794.111 General characteristics of the
statutory "enterprise". As defined in the Act, the term "enterprise” is roughly descriptive of a business rather than of an establishment or of an employer although on occasion the three may coincide. The enterprise, however, is not necessarily coextensive with the entire business activities of an employer. The enterprise may consist of a single establishment which may be operated by one or more employers; or it may be composed of a number of establishments which may be operated by one or more employers. On the other hand, a single employer may operate more than one enterprise. The Act treats different businesses which are unrelated to each other as separate enterprises even if they are operated by the same employer. Common types of business organizations which may constitute the "enterprise" for purposes of the Act are described in the following sections. Section 794.112 The single establishment busi
In many cases the entire business activities of the single owner-employer are performed in one
they are joined either through unified operation or common control into a unified business system or economic unit to serve a common business purpose." (S. Rept. 145, 87th Cong., 1st sess., p. 41.) Section 794.115 Inclusion of activities in en
terprise as dependent on method and pur
pose of performing them. The activities which are part of an enterprise engaged in the wholesale or bulk distribution of petroleum products, for purposes of the Act, are those related activities, and those only, which are performed by one or more employers for a “common business purpose" in the manner specified in section 3(r), that is, “either through unified operation or common control.”
Section 794.113 The multi-unit business.
In other cases one company conducts its single business in a number of establishments. An example of such an enterprise is the wholesale or bulk distributor of petroleum products who has more than one storage establishment or who also operates separate gasoline service stations. All of the activities ordinarily are related and performed through unified operation or common control for one business purpose. In such circumstances the entire business is a single enterprise. The sales of the entire business from all of its establishments are considered together to determine whether the dollar volume requirements of the exemption are met. Of course, as noted in section 794.14 (b), the application of the Act to the employees of a separate gasoline service establishment of such an enterprise must be determined with reference to sections 3(s) (5), 13(b) (8), and other pertinent provisions of the statute, in accordance with the principles discussed in Part 779 of this chapter. Section 794.114 Complex business organiza.
tions. In some cases one employer may operate several separate enterprises; in others, several employers may conduct their business activities in such a manner that they are part of a single enterprise. The answer, in each case, as to whether or not the "enterprise” includes certain activities will depend on whether the particular activities are performed in conjunction with other activities included in the enterprise, either through “unified operation” or “common control", as “related" activities directed to a “common business purpose”, or whether, on the other hand, the lack of such a unity and relationship demonstrates that they are the activities of a separate and distinct business. As the Senate Report states, “related activities conducted by separate business entities will be considered a part of the same enterprise where
Section 794.116 "Common business purpose".
Generally, the term "common business purpose" will encompass activities, whether performed by one person or by more than one person, or corporation, or other business organization, which are directed to the same business objective or to similar objectives in which the group has an interest. The scope of the term "enterprise” in section 3(r) of the Act encompasses a single business entity as well as a unified business system which performs related activities for a common business purpose. What is a “common business purpose” in any particular case involves a practical judgment based on the facts in the light of the statutory provisions and the legislative intent. The answer ordinarily will be readily apparent from the facts. The facts may show that various activities are related to the conduct of a single business and are so operated or controlled as to form a part of a unified business system directed to a single business objective. In such cases, it will follow that they are performed for a common business purpose. Where, however, the facts show that there are some activities of the employer or employers which are not performed as a part of such a single business but in furtherance of an entirely separate and unrelated business, they will be considered performed for a different business purpose and will be a part of a different enterprise, for purposes of the Act. Section 794.117 “Unified operation”.
The term "unified operation" does not have a fixed legal or technical meaning; a practical judgment is required to determine whether there is unified operation of related activities for a common
business purpose. There are many instances in business where several establishments, persons, corporations or other business organizations, join together to perform some or all of their activities as a unified business or business system and accomplish such unification through varied agreements, franchises, grants, leases or other arrangements. Whether in any particular case the activities are performed through "unified operation" and have the effect of creating a single enterprise, will depend upon all the facts, including the manner in which the activities are performed, the agreements and arrangements which govern their performance and the other relationships between the parties. Some arrangements which do not amount to unified operations are specified in the proviso contained in section 3(r). Where the related activities are performed by a single company, or under other single ownership, they will ordinarily be performed under “common control" and the question whether they are performed through “unified operation” will not need to be decided. Section 794.118 “Common control”.
The term "common control”, as used in section 3(r) of the Act, also does not have a fixed legal
or technical meaning. "Common control” means the sharing of control and is not limited to sole control or complete control by one person or corporation. “Common control” thus exists where the performance of the related activities are controlled by one person, or by a number of persons, corporations, or other organizational units acting together. "Common control” may exist whether or not there is common ownership. This term is discussed more fully in sections 779.215 to 779.224 of this chapter, dealing with the application of the Act to retailers of goods or services. It should be remembered that it is for purposes of determining whether certain related activities are a part of the enterprise that it must be established that the related activities are performed either through "unified operation” or “common control". The meaning of the term “common control" in this context must be distinguished from that of the term “independently * * * controlled” as used in section 13(b) (10) for purposes of determining whether the enterprise engaged in wholesale or bulk distribution of petroleum products is “an independently owned and controlled” local enterprise. The meaning of the latter term is discussed in detail in subsequent sections of this subpart.
"RELATED" ACTIVITIES WHICH CONSTITUTE THE ENTERPRISE
Section 794.119 “Related” activities in gen
An "enterprise” under the Act (including an enterprise which is engaged in the wholesale or bulk distribution of petroleum products), as previously explained, consists of certain "related" activities performed in the manner and for the purpose prescribed in section 3(r) (see sections 794.115 to 794.118); activities which are not "related” are not a part of the enterprise even if performed by the same employer (see section 794.125). In determining the scope of an enterprise engaged in the wholesale or bulk distribution of petroleum products, so that it may be tested for exemption under section 13(b) (10) or for coverage under section 3(s), all these related activities which are part of the enterprise must be taken into consideration.
each case upon whether the activities serve the business purpose of the enterprise, or whether they serve a separate and unrelated business. Activities will be regarded as "related” when they are the same or similar or when they are auxiliary or service activities such as warehousing, bookkeeping, purchasing, advertising including, generally, all activities which are necessary to the operation and maintenance of the particular business. Common ownership standing alone does not establish that activities are “related" or bring unrelated activities within the scope of the same "enterprise": However, all activities which are performed as a part of a unified business operation will be related, including, in appropriate cases, the manufacturing, warehousing and distribution of its goods, the repair and maintenance of its equipment, machinery and its premises, and all other activities are performed for the common business purpose of the enterprise. In the case of an enterprise engaged in the wholesale or bulk distribution of petroleum products, all activities customarily performed by
Section 794.120 What are “related activities".
Generally, the answer to the question whether particular activities are “related” will depend in