794.133 Dependence of exemption on sales volume of

794.149

enterprise.

794.150

794.134 Meaning of "annual gross volume of sales".

794.135

794.151

Exclusion of excise taxes.

794.136 Ascertainment of "annual" gross sales volume. 794.137 Methods of computing annual volume of sales. 794.138 Computations on a fiscal year basis. 794.139 Grace period of one month for compliance. 794.140 Computations for a new business.

SALES MADE WITHIN THE STATE

794.141 Exemption conditioned on making 75 percent of sales within the State.

794.142 Sales made to out-of-State customers.

APPLICATION OF EXEMPTION TO EMPLOYEES

Employees who are exempt.

Effect of activities other than "wholesale or bulk distribution of petroleum products".

Workweek unit in applying the exemption. 794.152 Work exempt under another section of the Act. 794.153 Other exemptions which may be applicable to employees of enterprises engaged in the wholesale or bulk distribution of petroleum products. AUTHORITY: Sections 794.0 to 794.153 issued under secs. 1-19, 52 Stat. 1060, as amended; 75 Stat. 65; 29 U.S.C. 201-219.

SOURCE: Sections 794.0 to 794.153 appear at 27 F.R. 3125, March 31, 1962.

Section 794.0 General scope of the Act.

The Fair Labor Standards Act, as amended, hereinafter referred to as the Act, is a Federal statute of general application which establishes minimum wage, overtime pay, and child labor requirements that apply as provided in the Act. All employees whose employment has the relationship to interstate or foreign commerce which the Act specifies are subject to the prescribed labor standards unless specifically exempted from them. Employers having such employees are required to comply with the Act's provisions in this regard unless relieved therefrom by some exemption in the Act. Such employers are also required to comply with specified recordkeeping requirements contained in Part 516 of this chapter. The law authorizes the Department of Labor to investigate for compliance and, in the event of violations, to supervise the payment of unpaid wages or unpaid overtime compensation owing to any employee. The law also provides for enforcement in the

courts.

Section 794.1 Purpose of this part.

This Part 794 constitutes the official intepretation of the Department of Labor with respect to the meaning and application of section 13 (b) (10) of the Act. This section provides an exemption from the overtime provisions of section 7 of the Act (but not from the minimum wage, child labor, or recordkeeping provisions) with respect to employees of an independently owned and controlled local enterprise engaged in the wholesale or bulk distribution of petroleum products, if the enterprise meets certain specified conditions. This exemption was added to the Act by the 1961 Amendments. It is the purpose of this part to make available in one place the interpretations of the law governing this exemption which will guide the Secretary of Labor and the Administrator in the performance of their duties under the Act.

Section 794.2 Matters discussed in this part. This part primarily discusses the meaning and application of the section 13 (b) (10) exemption.

The meaning and application of other provisions of the Fair Labor Standards Act are discussed only to make clear their relevance to the 13 (b) (10) exemption and are not considered in detail in this part. Interpretations published elsewhere in this title deal with such subjects as the general coverage of the Act (Part 776 of this chapter), methods of payment of wages (Part 531, Subpart C of this title), computation and payment of overtime compensation (Part 778 of this chapter), retailing of goods or services (Part 779 of this chapter), hours worked (Part 785 of this chapter), and child labor provisions (Subpart G of Part 4 of this title). Regulations on recordkeeping are contained in Part 516 of this chapter, and regulations defining exempt bona fide executive, administrative, and professional employees are contained in Part 541 of this chapter. Child labor regulations are included in Part 4 of this title. Regulations and interpretations on other subjects concerned with the application of the Act are listed in the table of contents to this chapter. Copies of any of these documents may be obtained from any office of the Wage and Hour and Public Contracts Divisions. Section 13 (b) (10) and the application of the overtime pay exemption which it provides are discussed in some detail in Subpart B of this part. In addition, sections 794.7 et seq. of this subpart briefly consider or make reference to the guides for determining what employment in enterprises described in section 13(b) (10) is subject to the minimum wage and overtime pay requirements if a specific exemption therefrom does not apply.

Section 794.3 Significance of official interpretations.

The interpretations of the law contained in this part are official interpretations of the Department of Labor with respect to the application under described circumstances of the provisions of law which they discuss. These interpretations indicate the construction of the law which the Secretary of Labor and the Administrator believe to be correct and which will guide them in the performance of their duties under the Act unless and until they are otherwise directed by authoritative decisions of the courts or conclude, upon re-examination of an interpretation, that it is incorrect. The interpretations in this part provide statements of general principles applicable to the subjects discussed and illustrations of the application of these

principles to situations that frequently arise. They do not and cannot refer specifically to every problem which may be met in the consideration of the exemption discussed. The omission to discuss a particular problem in this part or in interpretations supplementing it should not be taken to indicate the adoption of any position by the Secretary of Labor or the Administrator with respect to such problem or to constitute an administrative interpretation or practice or enforcement policy. Questions on matters not fully covered by this part may be addressed to the Administrator of the Wage and Hour and Public Contracts Divisions, United States Department of Labor, Washington 25, D.C.. or to any Regional Office of the Divisions. Section 794.4 Basic support for interpretations.

The ultimate decisions on interpretations of the Act are made by the courts (Mitchell v. Zachry, 362 U.S. 310; Kirschbaum v. Walling, 316 U.S. 517). Court decisions supporting interpretations contained in this part are cited where it is believed they may be helpful. On matters which have not been determined by the courts, it is necessary for the Secretary of Labor and the Administrator to reach conclusions as to the meaning and the application of provisions of the law in order to carry out their responsibilities of administration and enforcement (Skidmore v. Swift, 325 U.S. 134). In order that these positions may be made known to persons who may be affected by them, official interpretations are issued by the Administrator on the advice of the Solicitor of Labor, as authorized by the Secretary (Reorg. Pl. 6 of 1950, 64 Stat. 1263; Gen. Ord. 45A, May 24, 1950, 15 F.R. 3290). As included in the regulations in this part, these interpretations are believed to express the intent of the law as reflected in its provisions and as construed by the courts and evidenced by its legislative history. References to pertinent legislative history are made in this part where it appears that they will contribute to a better understanding of the interpretations.

Section 794.5 Reliance on interpretations.

As previously stated, the interpretations of the law contained in this part are official interpretations. So long as they remain effective and are not modified, amended, rescinded, or determined by judicial authority to be incorrect, they may be re

lied upon as provided in section 10 of the Portalto-Portal Act of 1947 (63 Stat. 910, 29 U.S.C. 251 et seq., discussed in Part 790 of this chapter). In addition, the Supreme Court has recognized that such interpretations of this Act "provide a practical guide to employers and employees as to how the office representing the public interest in its enforcement will seek to apply it" and "constitute a body of experience and informed judgment to which courts and litigants may properly resort for guidance." Further, as stated by the Court: "Good administration of the Act and good judicial administration alike require that the standards of public enforcement and those for determining private rights shall be at variance only where justified by very good reasons." (Skidmore v. Swift, 323 U.S. 134.)

Section 794.6 Interpretations made, continued, and superseded by this part.

On and after publication of this part in the FEDERAL REGISTER, the interpretations contained therein shall be in effect and shall remain in effect until they are modified, rescinded, or withdrawn. Prior opinions, rulings, and interpretations and prior enforcement policies which are not inconsistent with the interpretations in this part or with the Fair Labor Standards Act as amended by the Fair Labor Standards Amendments of 1961 and which were in effect at the time of such publication are continued in effect; all other opinions, rulings, interpretations, and enforcement policies on the subjects discussed in the interpretations in this part are rescinded and withdrawn.

Section 794.7 Basic coverage as related to the

exemption.

The purpose of the exemption provided by section 13 (b) (10) is to exclude from the overtime pay requirements of the Act employment within the Act's general coverage which would be subject to such requirements if not so exempted. Such employment, even when it is so exempted, remains subject to the minimum wage and child labor requirements. The nature of the employment coming within the basic or general coverage of the Act, in the enterprises described in section 13 (b) (10), should therefore be clearly understood. The general coverage of the Act extends, and its requirements apply except as otherwise provided by a specific exemption, to every employee who is "engaged in commerce or in the production of goods for commerce" and (on and after September 3, 1961) every employee who is "employed in an enterprise engaged in commerce or in the production of goods for commerce" or "by an establishment" qualifying as such an enterprise, as specified and defined in the statute. What employees are so engaged or employed must be ascertained in the light of the definitions and delimitations set forth in the statute, giving due regard to authoritative interpretations by the courts and to the legislative history of the Act, as amended. In sections 794.8 to 794.23, the employment which comes within this basic coverage is briefly outlined with particular

reference to engagement in the wholesale or bulk distribution of petroleum products. For a more comprehensive discussion and a detailed explanation of the applicable principles, reference should be made to the interpretation on general coverage contained in Part 776 of this chapter.

Section 794.8 General coverage of employees "engaged in commerce".

(a) The minimum wage and overtime pay provisions of the Act have applied since 1938, and continue to apply, except as otherwise provided by specific exemptions in the Act, to employees "engaged in commerce". "Commerce" is broadly defined in section 3(b) of the Act. It includes both interstate and foreign commerce and is not limited to transportation across State lines, or to activity of a commercial character. All parts of the movement among the several States or between any State and any place outside thereof of persons or things, tangibles or intangibles, including communication of information and intelligence constitute movement in "commerce" within the statutory definition. This includes those parts of any such activity which take place wholly within a single State. In addition, the instrumentalities for carrying on such commerce are so inseparable from the commerce itself that employees working on such instrumentalities within the borders of a single State are, by virtue of the contribution

made by their work to the movement of the commerce, "engaged in commerce" within the meaning of the Act.

(b) Consistent with the purpose of the Act to apply the Federal standards "throughout the farthest reaches of the channels of interstate commerce", the courts have made it clear that the employees "engaged in commerce" to whom coverage is extended include every employee employed in the channels of such commerce or in activities so closely related to such commerce as to be considered a part of it as a practical matter. See Walling v. Jacksonville Paper Co., 317 U.S. 564; Overstreet v. North Shore Corp., 318 U.S. 125; Mitchell v. Joyce Agency, 348 U.S. 945; Mitchell v. Volmer, 349 U.S. 427; Mitchell v. Lublin, 358 U.S. 207; Mitchell v. Zachry, 362 U.S. 310; and see the discussion, with other pertinent court decisions cited, in Part 776 of this chapter. Engaging "in commerce" includes activities connected therewith such as management and control of the various physical processes, together with the accompanying accounting and clerical activities (Donovan v. Shell Oil Co., 168 F.2d 229). Thus, employees engaged in interstate or foreign commerce will typically include, among others, employees in distributing industries such as wholesaling or retailing who sell, transport, handle, or otherwise work on goods moving in interstate or foreign commerce as well as workers who order, receive, guard, pack, ship, or keep records of such goods; employees who handle payroll or personnel functions for workers engaged in such activities; clerical and other workers who regularly use the mails, telephone, or telegraph for communication across State lines; and employees who regularly travel across State lines while working. For other illustrations see Part 776 of this chapter.

Section 794.9 General coverage of employees "engaged in *** the production of goods for commerce".

(a) The minimum wage and overtime pay provisions of the Act also have applied since 1938, and continue to apply, except as otherwise provided by specific exemptions in the Act, to employees "engaged in *** the production of goods for commerce". The broad meaning of "commerce" as defined in section 3(b) of the Act has been outlined in section 794.8. "Goods" is also

comprehensively defined in section 3 (i) of the Act, and includes "articles or subjects of commerce of any character, or any part or ingredient thereof" not expressly excepted by the statute. The activities constituting "production" of the goods for commerce are defined in section 3 (j) of the Act. These are not limited to such work as manufacturing but include handling or otherwise working on goods intended for shipment out of the State either directly or indirectly or for use within the State to serve the needs of the instrumentalities or facilities by which interstate or foreign commerce is carried on. See Mitchell v. Joyce Agency, 348 U.S. 945; Alstate Constr. Co. v. Durkin, 345 U.S. 13. Employees engaged in any closely related process or occupation directly essential to such production of any goods, whether employed by the producer or by an independent employer, are also engaged, by definition, in "production". See section 794.10 and the detailed discussion in Part 776 of this chapter. Further, the courts have recognized that an enterprise producing goods for commerce does not accomplish the actual production of such goods solely with employees performing physical labor on them. Thus, in Borden v. Borella, 325 U.S. 679, it was held that employees engaged in the administration, planning, management, and control of the various physical processes together with the accompanying clerical and accounting activities are, from a productive standpoint and for purposes of the Act, "actually engaged in the production of goods for commerce just as much as are those who process and work on the tangible products" in the manufacturing plants or other producing facilities of the enterprise.

(b) Typically, but not exclusively, employees engaged in the production of goods for interstate or foreign commerce include those who work in manufacturing, processing, and distributing establishments, including wholesale and retail establishments, that "produce" (including handle or work on) goods for such commerce. This includes everyone employed in such establishments, or elsewhere in the enterprises by which they are operated, whose activities constitute "production" of such goods under the principles outlined in paragraph (a). Thus, employees who sell, process, load, pack, or otherwise handle or work on goods which are to be shipped or delivered outside the State either by their employer or by another firm,

and either in the same form or as a part or ingredient of other goods, are engaged in the production of goods for commerce within the coverage of the Act. So also are the office, management, sales, and shipping personnel, and maintenance, custodial, and protective employees who perform, as a part of the integrated effort for the production of the goods for commerce, services related to such production or to such goods or to the plant, equipment, or personnel by which the production is accomplished.

Section 794.10 "Closely related" and "directly essential" activities.

As previously noted in section 794.9, an employee is engaged in the production of goods for interstate or foreign commerce within the meaning of the general coverage provisions of the Act even if his work is not an actual and direct part of such production, so long as he is engaged in a process or occupation which is "closely related" and "directly essential" to it. This is true whether he is employed by the producer of the goods or by someone else who provides goods or services to the producer. See in this connection Kirschbaum v. Walling, 316 U.S. 517, and Mitchell v. Joyce Agency, 348 U.S. 945, affirming 110 F. Supp. 918. A full discussion of "closely related" and "directly essential" work is contained in Part 776 of this chapter. Typical of employees covered under these principles are bookkeepers, stenographers, clerks, accountants, and auditors and other office and white-collar workers, and employees doing payroll, timekeeping, and time study work for the producer of goods; employees in the personnel, labor relations, advertising, promotion, and public relations activities of the producing enterprise; work instructors for the producers; employees maintaining, servicing, repairing or improving the buildings, machinery, equipment, vehicles or other facilities used in the production of goods for commerce, and such custodial and protective employees as watchmen, guards, firemen, patrolmen, caretakers, stockroom workers and warehousemen; and transportation workers bringing supplies, materials, or equipment to the producer's premises, removing waste materials therefrom, or transporting materials or other goods, or performing such other transportation activities, as the needs of production may require. These examples are illustrative, rather than ex

haustive, of the employees who are "engaged in the production of goods for commerce" by reason of performing activities closely related and directly essential to such production.

Section 794.11 What goods are considered as produced for commerce.

Goods (as defined in 3 (i) of the Act) are "produced for commerce" if they are "produced, manufactured, mined, handled or in any other manner worked on" in any State for sale, trade, transportation, transmission, shipment, or delivery, to any place outside thereof. Goods are produced for commerce where the producer intends, hopes, expects, or has reason to believe that the goods or any unsegregated part of them will move (in the same or in an altered form or as a part or ingredient of other goods) in interstate or foreign commerce. If such movement of the goods in commerce can reasonably be anticipated by the producer when the goods are produced, it makes no difference whether he himself or the person to whom the goods are transferred puts the goods in interstate or foreign commerce. The fact that goods do move in interstate or foreign commerce is strong evidence that the producer intended, hoped, expected, or had reason to believe that they would so move. Goods may also be produced "for commerce" where they are to be used within the State and not transported in any form across State lines. This is true where the use to which they are put is one which serves the needs of the instrumentalities or facilities by which interstate or foreign commerce is carried on within the State. These principles are discussed comprehensively in Part 776 of this chapter.

Section 794.12 Coverage is not based on amount of covered activity.

The Act makes no distinction as to the percentage, volume, or amount of activities of either the employee or the employer which constitute engaging in commerce or in the production of goods for commerce. (Mabee v. White Plains Publishing Co., 327 U.S. 128; United States v. Darby, 312 U.S. 100). As explained more fully in Part 776 of this chapter, the law is settled that every employee whose activities in commerce or in the production of goods for commerce, even though small in amount, are regular and recurring, is considered "engaged in commerce or in the pro