ployees are required to comply with the Act's provisions in this regard unless relieved therefrom by some exemption in the Act, and 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 minimum wages or unpaid overtime compensation owing to any employee. The law also provides for enforcement in the courts.

Section 781.2 Matters discussed in this part and other parts.

This Part 781 discusses only the scope of the exemption provided by section 13(a) (3) for "any employee employed by any establishment engaged in laundering, cleaning or repairing clothing or fabrics ***”. Interpretations having general application to other subjects of the law, as well as to laundry and dry cleaning establishments and their employees, will be found in other parts of this chapter. Reference should be made to them for guidance on matters which they discuss in detail and which this part does not undertake to do. They include Part 776 of this chapter, discussing the coverage provisions of the Act; Part 531 of this chapter discussing methods of payment of wages; Part 778 of this chapter discussing computation and payment of overtime compensation; Part 785 of this chapter discussing the calculation of hours worked; the recordkeeping requirements which are set forth in Part 516 of this chapter, and the child labor provisions of the Act which are discussed in Part 1500 of this title.

Section 781.3 Reliance upon interpretations. The interpretations of the law contained in this part are official interpretations which may be relied upon as provided in section 10 of the Portalto-Portal Act of 1947. All prior opinions, rulings and interpretations which are inconsistent with the interpretations in this part are rescinded and withdrawn.

THE 13(a) (3) EXEMPTION

Section 781.4 The statutory provision.

Section 13 (a) (3) provides an exemption from both the minimum wage and overtime requirements of the Act and applies to:

Any employee employed by any establishment engaged in laundering, cleaning, or repairing clothing or fabrics, more than 50 per centum of which establishment's annual dollar volume of sales of such services is made within the State in which the establishment is located: Provided, That 75 per centum of such establishment's annual dollar volume of sales of such services is made to customers who are not engaged in a mining, manufacturing, transportation, or communications business.

Section 781.5 Legislative history of exemption.

Before the 1949 Amendments the exemption for retail or service establishments, under section 13 (a) (2) of the Act, included laundry and dry cleaning establishments. The 1949 Amendments separated these exemptions. Section 13 (a) (2) was made applicable only to retail or service establishments whose sales or services "are recognized as ** It was retail * * * in the particular industry." the Congressional view at that time that there is not a clear concept of "retail services" in the laundry and dry cleaning industry and, for that reason, a separate exemption as contained in section 13(a) (3) was provided (95 Cong. Rec., p. 12503). No change in the 13(a) (3) exemption provisions was made by the 1961 Amendments. Section 13(a) (3) is complete, setting forth the terms and limitations of the exemption. The exemption is exclusive; employees employed by an establishment engaged in laundering, cleaning or repairing clothing or fabrics, if intended to be exempt, are exempt under section 13 (a) (3). A laundry or dry cleaning establishment which fails to qualify for the section 13 (a) (3) exemption may not claim exemption under section 13(a)(2).

TYPES OF ESTABLISHMENTS INTENDED TO
BE EXEMPT

Section 781.6 Exemption applied to certain types of establishments.

(a) General. The exemption in section 13(a) (3) depends on the character of the establishment by which the employee is employed. This exemption, by its terms, applies only to any employee employed by any "establishment engaged in laundering, cleaning or repairing clothing or fabrics" which meets certain tests. Therefore, if the establishment is of the type described in section 13 (a) (3), all employees "employed by" that establishment are exempt from sections 6 and 7 of the

Act. The meaning and application of this exemption, in the first instance, depends on what is meant by "an establishment engaged in laundering, cleaning or repairing clothing or fabrics." Although the Act does not define these terms their meaning has been established by statements of Congressional intent, decisions of the courts, and interpretations of the Administrator. The meaning of these terms is discussed in the following paragraphs of this section.

(b) Meaning of establishment. As used in the Act, the term "establishment," which is not specifically defined therein, refers to a "distinct physical place of business" rather than to an entire business or enterprise which may include several separate establishments, some of which may qualify for an exemption and some of which may not. This is consistent with the meaning of the term as it is normally used in business and in government and is judicially settled and has been recognized in the Congress in the course of enactment of amendatory legislation (Phillips v. Walling, 324 U.S. 490; Mitchell v. Bekins Van & Storage Co., 352 U.S. 1027; 95 Cong. Rec. 12505, 12579, 14877; H. Rept. 1453, 81st Cong., 1st Sess., p. 25). For example, a hat manufacturing company which operates several places of business for the sale of its manufactured products may also operate a number of separate dry cleaning establishments within the meaning of the exemption. The hat manufacturing establishment would not qualify for exemption under section 13 (a) (3), whereas, the establishments engaged in cleaning hats may qualify for the exemption provided that they meet the other tests specified in section 13 (a) (3).

(c) Laundries and dry cleaning establishments within the exemption. As pointed out in section 781.5, the section 13 (a) (3) exemption was proposed and enacted into law in order to deal specifically with laundry and dry cleaning establishments as a class in contrast with other types of establishments intended to be exempt as retail or service establishments under section 13 (a) (2) of the Act. The legislative history of the exemption, enacted in 1949, indicates that the establishments "engaged in laundering, cleaning or repairing clothing or fabrics" to which section 13(a) (3) refers are laundry and dry cleaning establishments exclusively-those establishments in the laundry and dry cleaning industries which are de

voted to the performance for customers of the services described. Thus, the establishments which will qualify for exemption if they meet the two statutory tests include not only (1) those laundry and dry cleaning establishments which perform on the same premises all the operations of receiving clothing or fabrics from customers; laundering, cleaning, and repairing the articles, and redelivering the articles to their customers, but also (2) central laundry or dry cleaning establishments, and (3) those laundry or dry cleaning establishments (generally known in the trade as "press shops", or "will-call" or "pick-up and delivery" stores) which receive from their customers clothing or fabrics for laundering, cleaning, or repairing at a central laundry or dry cleaning establishment, and then return them to these customers.

(d) Repair services. The "repairing" service which is included in the statutory language of the exemption refers only to such "repairing" services as are incidental to the performance of laundry or dry cleaning work. It has no reference to "repairing" establishments as such. "Repairing" establishments are not within the section 13 (a) (3) exemption. To be exempt such establishments must qualify under the section 13(a) (2) retail or service exemption. The legislative history of the section 13(a) (3) exemption shows quite clearly that the exemption was intended to deal with the laundry and dry cleaning establishment problem only. Throughout the debates in Congress the amendment was always referred to as the laundry and dry cleaning establishment exemption. This same approach was also followed in the analysis of the exemption in the Statement of the Managers on the Part of the House (H. Rept. 1453, 81st Cong., 1st sess., pp. 26-27). The references in the analysis were consistently made to the "laundry" or "dry cleaning" establishment. Nowhere in the legislative history is any reference made to a "repairing establishment." However, a laundry or dry cleaning establishment is exempt if it meets the two requirements of the exemption even if it performs repair services on items laundered or cleaned whether such items are shirts, towels, bed sheets, aprons, uniforms, suits, or the fabrics on upholstered furniture, or rugs, or slip covers or draperies or any other clothing or fabrics.

(e) Dyeing Operations. An establishment engaged in dyeing operations is not exempt under

section 13(a) (3) since such services do not constitute "laundering, cleaning or repairing clothing or fabrics."

(f) Linen supply services. An establishment which provides linen supply service will be regarded as an establishment engaged in the business of laundering, cleaning or repairing of clothing or fabrics which will qualify for the section 13(a) (3) exemption, if it otherwise meets the statutory tests, even if the clothing or fabrics which it supplies to its customers are not owned by them, and even though it may not, itself, perform the laundering, cleaning or repairing operations.

(g) Rug and carpet cleaning establishments. An establishment engaged in the business of laundering, cleaning or repairing of rugs and carpets will be regarded as an establishment engaged in "laundering, cleaning or repairing clothing or fabrics" within the meaning of section 13 (a) (3). Such an establishment will be exempt, if it otherwise meets the requirements of section 13(a)(3), even if it repairs, binds, weaves, sews, stores and lays the carpets and rugs it cleans, as an incident to the cleaning work.

(h) Laundering and sale of industrial wiping cloths. The laundering and cleaning of industrial wiping cloths constitutes the laundering and cleaning of fabrics within the meaning of section 13(a) (3). The sale of such a service to a mining, manufacturing, transportation or communications. business would, of course, be subject to the 25% limitation imposed by the exemption. The sale of industrial wiping cloths, however, is not within the scope of the section 13(a) (3) exemption. Further, employees who cut, trim, or otherwise manufacture industrial wiping cloths are not exempt under section 13 (a) (3). Such activity would also not be exempt under section 13 (a) (2) or section 13 (a) (4) because the sale of these goods for use by industrial enterprises in their production operations are not retail sales nor is an establishment engaged in the manufacture and sale of this type of goods recognized as a retail establishment (see Part 779 of this chapter, sections 779.321 et seq., and 779.346 et seq.). However, if the establishment is otherwise engaged in the laundering, cleaning or repairing of clothing or fabrics under section 13 (a) (3), the manufacturing activities may be disregarded in determining whether

the establishment meets the tests of the 13 (a) (3) exemption. If the establishment does meet the tests of section 13 (a) (3) on the basis of its receipts from its laundry and linen supply services, only those employees exclusively engaged in these activities would qualify for exemption under this section of the Act.

REQUIREMENTS FOR EXEMPTION OF AN ESTABLISHMENT ENGAGED IN LAUNDERING, CLEANING OR REPAIRING CLOTHING OR FABRICS

Section 781.7 Requirements summarized.

To qualify for exemption, an establishment "engaged in laundering, cleaning, or repairing clothing or fabrics" as described in Section 781.6, must meet the following two tests:

(a) More than 50 percent of the establishment's annual dollar volume of sales of such services must be made within the State in which the establishment is located, and

(b) At least 75 percent of the establishment's annual dollar volume of sales of such services must be to customers who are not engaged in a mining, manufacturing, transportation, or communications business.

Section 781.8 More than 50 percent intrastate sales required.

The first test for exemption specified in section. 13(a) (3) is that more than 50 percent of the establishment's sales (measured by annual dollar volume) of "such services", that its laundry or dry cleaning services, must be made "within the State in which the establishment is located." This means that the establishment must be primarily engaged (more than 50 percent) in selling its services to customers within the State in which it is located. If the establishment is engaged to the extent of 50 percent or more in selling its laundry or dry cleaning services to customers outside the State of its location, the requirement is not met and the establishment cannot qualify for exemption.

Section 781.9 Out-of-State customers.

Whether the sale of laundry or dry cleaning service is made to an out-of-State customer is a question of fact. In order for a customer to be considered an out-of-State customer, some specific relationship between him and the seller has to

exist to indicate his out-of-State character. On the one hand, sales made to customers in States other than the one in which the establishment is located, clearly, are not sales made within the State. This would be the case where the establishment's drivers pick up or deliver the laundry or drycleaning to the customers in the other States, or where the establishment operates outlets in the other States, at which the customers deliver and pick up their own laundry or dry cleaning, or in other situations where the relationship with the customer is such as to indicate his out-of-State character. This would be the case, for example, where an out-of-State linen supply company in the regular course of dealing brings its linen into the State to be laundered by a laundry. The fact that in such a case the linen supply company delivers and picks up the linen in the State in which the laundry is located, would not alter the conclusion that the laundry service is sold to an out-of-State customer. On the other hand, sales made to the casual cash-and-carry customer of a laundry or dry cleaning establishment, who, for all practical purposes, is indistinguishable among the mass of customers who visit the establishment, are sales made within the State even if the seller knows or has reason to believe, because of his proximity to the State line or because he is frequented by tourists, that some of the customers who visit his establishment may reside outside the State. If the customer is of that type, sales made to him are sales made within the State even if the seller knows in the particular instance that the customer resides outside the State.

Section 781.10 Sales "made within the State"

and "interstate" sales distinguished. Sales to customers located in the same State as the establishment are sales made "within the State" even though such sales may constitute engagement in interstate commerce. For example, a sale to a customer in the same State as the establishment will be considered a sale made within the State even if the customer is engaged in interstate commerce or in the production of goods for inter

state commerce.

Section 781.11 Determining percentage of outof-State sales.

As explained in Section 781.15, below, for the purposes of computing the "annual dollar volume"

in section 13 (a) (3) only sales of laundering and cleaning services are counted.

LIMITATIONS ON SALES TO CERTAIN CUSTOMERS

Section 781.12 Sales to certain customers limited to 25 percent.

The second test specified in section 13 (a) (3) is that at least 75 percent of the sales of laundry or dry cleaning services (measured by annual dollar volume) must be made to customers who are not engaged in a "mining, manufacturing, transportation or communications business." No laundry or cleaning establishment will be exempt if more than 25 percent of its laundry or cleaning business is with such customers as those specified in the exemption. This is true whether the services performed are made directly to such businesses or through an intermediary. For example, the laundering of linens by a laundry establishment for a linen supply company which supplies these linens to customers engaged in a mining, manufacturing, transportation, or communications business, will be considered as services performed by the laundry establishment to customers engaged in such business. Whether a sale is made. to a customer who is engaged in a mining, manufacturing, transportation or communications business is a question which must be determined on the basis of all the facts. It should be noted, however, that it is the "customer", and not his establishment or facility, to whom sales are limited under this provision. Thus, if the sale is made to a customer "engaged in a mining, manufacturing, transportation or communications business", it must be included in the 25 percent limitation. regardless of whether it is made to him at his factory, his executive offices, or at any other of his establishments. The following paragraphs of this section contain some examples of sales which are regarded as made to customers in the named. businesses and which must be included in the 25 percent limitation imposed by section 13(a)(3):

(a) Mining. The following are regarded as customers engaged in a mining business: Customers engaged in the extractive industries. This includes all customers engaged in the business of extraction of minerals, including solids, such as coal and ores; liquids, such as crude petroleum; and gases, such as natural gas. The "mining" industry also includes quarrying, well operation, ex

ploration and development of mineral properties, and other preparations required to render the materials marketable.

(b) Manufacturing. The exclusion of sales made to a "manufacturing" business is not limited to factories or other manufacturing plants. This exclusion applies to laundry services performed for a sales office of a manufacturing plant, whether the office is located at the plant or in a different city and regardless of whether the sales office has a direct connection with the management of the plant, since it is a part of the "manufacturing business" whose products it sells. Laundry services sold to a power distributor which produces the power which it distributes must be included in the 25 percent tolerance because the distributor is engaged in a “manufacturing” business. However, if the power distributor purchases the power from a producer or from other power distributors, it is engaged only in distribution and not in a "manufacturing" business.

(c) Communications. The limitation of sales to a "communications" business includes sales to customers such as newspapers, broadcasting companies, telephone and telegraph companies.

(d) Transportation. Customers engaged in a transportation business do not include those engaged only in that transportation which is incidental to the sale of goods or services. The customers referred to are those in the transportation industry itself, who engaged in transportation as a business, such as railroads, airlines, bus companies, steamship lines, trucking lines, or other motor carriers. Thus, the laundering of uniforms for a bus company would be included in the 25 percent limitation, whereas laundering of uniforms for drivers of a retail store would not be a sale to a customer in the "transportation business."

Section 781.13 Sale made to a named business.

Where clothing or fabrics are collected at or delivered to the employer's premises, and where the use of the particular types of clothing or fabrics is primarily for the benefit or convenience of the employer, the laundering, cleaning, or repairing is a service to the business. This is true whether or not the laundry or dry cleaner receives the clothing or fabrics for laundering, cleaning, or repairing from the employer directly or indirectly, and whether or not the clothing or fabrics are owned by the employees, and whether or not

the laundering, cleaning, or repairing service is paid for by the employer or by the employees either directly or through deductions from their pay. Where the clothing is not of the type which is used primarily for the benefit or convenience of the employer "engaged in a mining, manufacturing, transportation, or communications business," but the employer nevertheless arranges and pays for the laundering, cleaning, or repairing of the clothing, the sales of these services are made directly to the employer and they are regarded as performed for the employer.

Section 781.14 Sales not made to a named business.

The section 13 (a) (3) exemption applies to a laundry or dry cleaning establishment which meets the two requirements contained in the exemption, whether it launders towels or other linen for barber or beauty shops, doctors' or dentists' offices, or schools, hospitals, restaurants, or hotels, or for the housewife. Generally, also the laundering, cleaning or repairing of personal clothing, including work clothing, picked up from the employee's home, in the ordinary course of dealing, is not a sale of the service to one of the named businesses even if the employee is employed in a mining, manufacturing, communications or transportation business. Thus, if work clothes are picked up from an employee's home as a part of his home laundry in the ordinary course of dealing with the employee, the laundry service would not be included in the 25 percent limitation whether or not the clothing is used primarily for the benefit and convenience of his employer engaged in one of the businesses listed in section 13 (a) (3).

COMPUTING THE ANNUAL VOLUME

Section 781.15 The annual period.

Both of the tests for exemption of a laundry or dry cleaning establishment under section 13(a) (3), are specified in terms of percentages of the "annual dollar volume of sales" of "such services." The term "such services" has reference to laundering, cleaning, or repairing clothing or fabrics. Therefore, in computing the annual dollar volume of sales, only the sales of laundry and cleaning services are counted. The annual dollar volume of sales of a laundry or dry cleaning establishment thus consists of its gross receipts from all laundry