of employment in such a county. The place of employment in which he engages in ginning need not be an establishment exclusively or even principally devoted to such operations; nor is it important whether the place of employment is on a farm or in a town or city in such a county, or whether or to what extent the cotton ginned there comes from the county in which the ginning is done or from nearby or distant sources. It is enough if the place of employment where the employee is engaged in ginning cotton for market is "located" in such a county.

Section 780.512 "County".

As used in the section 13(a) (18) exemption, the term "county" refers to the political subdivision of a State commonly known as such, whether or not such a unit bears that name in a particular State. It would, for example, refer to the political subdivision known as a "parish" in the State of Louisiana. A place of employment would not be located in a county, within the meaning of the exemption, if it were located in a city which, in the particular State, was not a part of any county.

Section 780.513 "County where cotton is grown".

For the exemption to apply, the employee must be ginning cotton in a place of employment in a county where cotton "is grown" in the described quantities. It is the cotton grown, not the cotton ginned in the place of employment, to which the quantity test is applicable. The quantities of cotton ginned in the county do not matter, so long as the requisite quantities are grown there.

Section 780.514 "Grown in commercial quantities".

Cotton must be "grown in commercial quantities" in the county where the place of employment is located if an employee ginning cotton in such place is to be exempt under section 13 (a) (18). The term "commercial quantities" is not defined in the statute, but in the cotton-growing areas of the country there should be little question in most instances as to whether commercial quantities of cotton are grown in the county where the ginning is done. If it should become necessary to determine

whether commercial quantities are grown in a particular county, it would appear appropriate in view of crop-year variations to consider average quantities produced over a representative period such as five years. On the question of whether the quantities grown are "commercial" quantities, the trade understanding of what are "commercial" quantities of cotton would be important. It would appear appropriate also to measure "commercial" quantities in terms of marketable lint cotton in bales rather than by acreages or amounts of seed cotton grown, since seed cotton is not a commercially marketable product (Mangan v. State, 76 Ala. 60). Also, production of a commodity in "commercial" quantities generally involves quantities sufficient for sale with a reasonable expectation of some return to the producers in excess of costs (Bianco v. Hess (Ariz.), 339 P. 2d 1038; Nystel v. Thomas (Tex. Civ. App.) 42 S.W. 2d 168).

WORKWEEK APPLICATION OF EXEMPTION

Section 780.515 Workweek is used in applying the exemption.

Once the growing of cotton in commercial quantities in the county where the employee's place of employment is located has been tested by a period appropriate for that purpose and established, the unit of time to be used in determining the application of the section 13 (a) (18) exemption to an employee is the workweek. (See Overnight Motor Transportation Co. v. Missel, 316 U.S. 572; McComb v. Puerto Rico Tobacco Marketing Co-op. Ass'n., 80 F. Supp. 953, affirmed 181 F. 2d 697.) A workweek is a fixed and regularly recurring interval of 7 consecutive 24-hour periods. It may begin at any hour of any day set by the employer and need not coincide with the calendar week. Once the workweek has been set it commences each succeeding week on the same day and at the same hour. Changing the workweek for the purpose of escaping the requirements of the Act is not permitted.

Section 780.516 Exclusive engagement in exempt work.

An employee who engages exclusively in a workweek in work which is exempt under section 13 (a) (18) is exempt from the Act's minimum wage and overtime pay requirements for the entire week,

if he is so engaged in a place of employment located in a county where cotton is grown in commercial quantities.

Section 780.517 Exempt and nonexempt work.

Where an employee in the same workweek is engaged in ginning of cotton for market which is exempt under section 13 (a) (18) if engaged in for the entire workweek, and also engages in work to which the Act applies and which is not exempt under this or any other section of the Act, he is not exempt that week. (See McComb v. Puerto Rico Tobacco Marketing Co-op. Ass'n., 80 F. Supp. 953, affirmed 181 F. 2d 397; Abram v. San Joaquin Cotton Oil Co., 46 F. Supp. 969; McComb v. del Valle, 80 F. Supp. 945; Walling v. Peacock Corp., 58 F. Supp. 880; Waialua v. Maneja, 77 F. Supp. 480.)

Section 780.518 Work exempt under another section of the Act.

Where an employee performs work during his workweek, some of which is exempt under section 13(a) (18) and the remainder of which is exempt under another section or sections of the Act, the exemptions may be combined. If the scope of the exemptions is not the same, the combination exemption applicable to the employee is controlled by the exemption which is more limited in scope. For example, if part of his work is exempt from both minimum wage and overtime compensation under section 13(a) (18) and the rest is exempt only from the overtime pay requirements, as under the section 7(c) exemption for the processing of cottonseed, the employee is exempt that week from the overtime provisions, but not from the minimum wage requirements.

SOURCE: Sections 780.600 to 780.624 appear at 26 F.R. 10403, Nov. 3, 1961.

INTRODUCTORY

Section 780.600 Scope and significance of interpretative bulletin.

Subpart A of this Part 780 and this subpart together constitute the official interpretative bulletin of the Department of Labor with respect to the meaning and application of section 13(a) (17) of the Fair Labor Standards Act of 1938, as amended. This section provides an exemption from the minimum wage and overtime pay provisions of the Act for employees employed by certain country elevators "within the area of production", as defined by the Secretary of Labor. As appears more fully in Subpart A of this part, interpretations in this bulletin with respect to provisions of the Act discussed are official interpretations upon which reliance may be placed and which will guide the Secretary of Labor and the Administrator in the performance of their duties under the Act. The general exemptions provided in section 13 (a) (6) of the Act for employees employed in agriculture and in section 13(a)(10) for certain related employment within the "area of production", and the partial overtime exemption for seasonal industries under section 7(b) (3)

of the Act are not discussed in this subpart except in their relation to section 13 (a) (17). The meaning and application of these exemptions are discussed, in Subparts B, H, and J, respectively, of this Part 780.

Section 780.601 Statutory provision.

Section 13 (a) (17) of the Fair Labor Standards. Act, effective September 3, 1961, exempts from the minimum wage requirements of section 6 and from the overtime provisions of section 7:

any employee employed within the area of production (as defined by the Secretary) by an establishment commonly recognized as a country elevator, including such an establishment which sells products and services used in the operation of a farm: Provided, That no more than five employees are employed in the establishment in such operations * *

Section 780.602 What determines application of the exemption.

The application of the section 13(a) (17) exemption depends on the employment of the employee by an establishment of the kind described. in the section, and on such employment "within the area of production" as defined by regulation. In any workweek when an employee is employed in country elevator activities by such an establishment within the area of production, the minimum

wage and overtime pay requirements of the Act will not apply to him.

Section 780.603 Basic requirements for exemption.

The basic requirements for exemption of country elevator employees under section 13 (a) (17) of the Act are as follows:

(a) The employing establishment must(1) Be an establishment "commonly recognized as a country elevator", and

(2) Have not more than five employees employed in its operations as such; and

(b) The employee must

(1) Be "employed by" such establishment, and (2) Be employed "within the area of production", as defined by the Secretary of Labor.

All the requirements must be met in order for the exemption to apply to an employee in any workweek. The requirements in section 13(a) (17) are "explicit prerequisites to exemption" and the burden of showing that they are satisfied rests upon the employer who asserts that the exemption applies (Arnold v. Kanowsky, 361 U.S. 388). In accordance with the general rules stated in section 780.2 of Subpart A of this Part 780, this exemption is to be narrowly construed and applied only to those establishments plainly and unmistakably within its terms and spirit. The requirements for its application will be separately discussed below.

"ESTABLISHMENT COMMONLY RECOGNIZED AS A

COUNTRY ELEVATOR"

Section 780.604 Dependence of exemption on nature of employing establishment.

If an employee is to be exempt under section 13(a) (17), he must be employed by an "establishment" which is "commonly recognized as a country elevator". If he is employed by such an establishment, the fact that it may be part of a larger enterprise which also engages in activities that are not recognized as those of country elevators (see Tobin v. Flour Mills, 185 F. 2d 596) would not make the exemption inapplicable.

Section 780.605 Meaning of "establishment".

The word "establishment" has long been interpreted by the Department of Labor and the courts to mean a distinct physical place of business and not to include all the places of business which may

be operated by an organization (Phillips v. Walling, 334 U.S. 490; Mitchell v. Bekins Van and Storage Co., 352 U.S. 1027). Thus, in the case of a business organization which operates a number of country elevators (see Tobin v. Flour Mills, 185 F.2d 596), each individual elevator or other place of business would constitute an establishment, within the meaning of the Act. Country elevators are usually one-unit places of business with, in some cases, an adjoining flat warehouse. No problem exists of determining what is the establishment in such cases. However, where separate facilities are used by a country elevator, a determination must be made, based on their proximity to the elevator and their relationship to its operations, on whether the facilities and the elevator are one or more than one establishment. If there are more than one, it must be determined by which establishment the employee is employed and whether that establishment meets the requirements of section 13(a) (17) before the application of the exemption to the employee can be ascertained (compare Mitchell v. Cammill, 245 F. 2d 207; Remington v. Shaw (W.D. Mich.), 2 WH Cases 262). Section 780.606 Recognition of character of establishment.

A further requirement for exemption is that the establishment must be "commonly recognized” as a country elevator. The word "commonly" means ordinarily or generally and the term "recognized” means known. An elevator should be generally known by the public as a country elevator. This requirement imposes, on the establishment for whose employees exemption is sought, the obligation to demonstrate that it engages in the type of work and has the attributes which will cause the general public to know it as a country elevator. The recognition which the statute requires must be shown to exist if the employer seeks to take the benefit of the exemption (see Arnold v. Kanowsky, 361 U.S. 388, 395).

Section 780.607 Establishments "commonly recognized" as country elevators.

In determining whether a particular establishment is one that is "commonly recognized" as a country elevator-and this must be true of the particular establishment if the exemption is to apply-it should be kept in mind that the intent of section 13 (a) (17) is to "exempt country elevators

that market farm products, mostly grain, for farmers" (107 Cong. Rec. (daily ed.) p. 5883). It is also appropriate to consider the characteristics and functions which the courts and government agencies have recognized as those of "country elevators" and the distinctions which have been recognized between country elevators and other types of establishments. For example, in proceedings to determine industries of a seasonal nature under section 7(b) (3) of the Act and Part 526 of the regulations in this chapter, "country" grain elevators, public terminal and sub-terminal grain elevators, wheat flour mill elevators, nonelevator type bulk grain storing establishments, and "flat warehouses" in which grain is stored in sacks, have been recognized as distinct types of establishments engaged in grain storage. (See 24 F.R. 2584; 3581.) As the legislative history of the exemption cited above makes clear, country elevators handle "mostly grain". The courts have recognized that the terms "country elevator" and "country grain elevator" are interchangeable (the term "country house" has also been recognized as synonymous), and that there are significant differences between country elevators and other types of establishments engaged in grain storage (see Tobin v. Flour Mills, 185 F. 2d 596; Mitchell v. Sampson Const. Co. (D.Kan.) 14 WH Cases 269). Section 780.608 A country elevator is located near and serves farmers.

Country elevators, as commonly recognized, are typically located along railroads in small towns or rural areas near grain farmers, and have facilities especially designed for receiving bulk grain by wagon or truck from farms, elevating it to storage bins, and direct loading of the grain in its natural state into railroad boxcars. The principal function of such elevators is to provide a point of initial concentration for grain grown in their local area and to handle, store for limited periods, and load out such grain for movement in carload lots by rail from the producing area to its ultimate destination. They also perform a transport function in facilitating the even and orderly movement of grain over the interstate network of railroads. from the producing areas to terminal elevators, markets, mills, processors, consumers and to seaboard ports for export. The country elevator is typically the farmer's market for his grain or the point at which his grain is delivered to carriers for

transportation to market. The elevator may purchase the grain from the farmer or store and handle it for him, and it may also store and handle substantial quantities of grain owned by or pledged to the government under a price-support program. Country elevators customarily receive, weigh, test, grade, clean, mix, dry, fumigate, store, and load out grain in its natural state, and provide certain incidental services and supplies to farmers in the locality. The foregoing attributes of country elevators have been recognized by the courts. See, for example, Mitchell v. Sampson Const. Co. (D. Kan.) 14 WH Cases 269; Tobin v. Flour Mills, 185 F. 2d 596; Holt v. Barnesville Elevator Co., 145 F. 2d 250; Remington v. Shaw (W.D. Mich), 2 WH Cases 262.

Section 780.609 Size and equipment of a country elevator.

Typically, the establishments commonly recognized as country elevators are small. Most of the establishments intended to come within the exemption have only one or two employees (107 Cong. Rec. (daily ed.) p. 5883), although some country elevators have a larger number. (See Holt v. Barnesville Elevator Co., 145 F. 2d 250.) Establishments with more than five employees are not within the exemption. (See section 780.612.) The storage capacity of a country elevator may be as small as 6,000 bushels (see Tobin v. Flour Mills, 185 F. 2d 596) and will generally range from 15,000 to 50,000 bushels. As indicated in section 780.608, country elevators are equipped to receive grain in wagons or trucks from farmers and to load it in railroad boxcars. The facilities typically include scales for weighing the farm vehicles loaded with grain, grain bins, cleaning and mixing machinery, driers for pre-storage drying of grain and endless conveyor belts or chain scoops to carry grain from the ground to the top of the elevator. The facilities for receiving grain in truckloads or wagon loads from farmers and the limited storage capacity, together with location of the elevator in or near the grain-producing area, serve to distinguish country elevators from terminal or subterminal elevators, to which the exemption is not applicable. The latter are located at terminal or interior market points, receive grain in carload lots, and receive the bulk of their grain from country elevators. Although some may receive grain from farms in the immediate area, they

are not typically equipped to receive grain except by rail. (See Tobin v. Flour Mills, supra; Mitchell v. Sampson Const. Co. (D. Kan.) 14 WH Cases 269.) It is the facilities of a country elevator for the elevation of bulk grain and the discharge of such grain into rail cars that make it an "elevator" and distinguish it from warehouses that perform similar functions in the flat warehousing, storage and marketing for farmers of grain in sacks. Such warehouses are not "elevators" and therefore do not come within the section 13(a) (17) exemption.

Section 780.610 A country elevator may sell

products and services to farmers.

Section 13(a) (17) expressly provides that an establishment commonly recognized as a country elevator, within the meaning of the exemption, includes "such an establishment which sells products and services used in the operation of a farm". This language makes it plain that if the establishment is "such an establishment", that is, if its functions and attributes are such that it is "commonly recognized as a country elevator" but not otherwise, exemption of its employees under this section will not be lost solely by reason of the fact that it sells products and services used in the operation of a farm. Establishments commonly recognized as country elevators, especially the smaller ones, not only engage in the storing of grain but also conduct various merchandising or "sideline" operations as well. (See Findings and Determination of the Presiding Officer (in proceedings for determination of industries of a seasonal nature under section 7(b) (3) of the Act and Part 526 of the regulations in this chapter), Wage and Hour Division Release G-143, April 11, 1941, p. 4.) They may distribute feed grains to feeders and other farmers, sell fuels for farm use, sell and treat seeds, and sell other farm supplies such as fertilizers, farm chemicals, mixed concentrates, twine, lumber, and farm hardware supplies and machinery. (See Tobin v. Flour Mills, 185 F.2d 596; Holt v. Barnesville Elevator Co., 145 F.2d 250). Services performed for farmers by country elevators may include grinding of feeds, cleaning and fumigating seeds, supplying bottled gas, and gasoline station services. As conducted by establishments commonly recognized as country elevators, the selling of goods and services used in the operation of a farm is a minor and inci

dental secondary activity and not a main business of the elevator (See Tobin v. Flour Mills, supra; Holt v. Barnesville Elevator Co., supra). Section 780.611 Exemption of mixed business applies only to country elevators.

The language of section 13 (a) (17) permitting application of the exemption to country elevators selling products and services used in the operation of a farm does not extend the exemption to an establishment selling products and services to farmers merely because of the fact that it is also equipped to provide elevator services to its customers. The exemption will not apply if the extent of its business of making sales to farmers is such that the establishment is not commonly known as a "country elevator" or is commonly recognized as an establishment of a different kind. As the legislative history of the exemption indicates, its purpose is limited to exempting country elevators that market farm products, mostly grain, for farmers who are working long workweeks and need to have the elevator facilities open and available for disposal of their crops during the same hours that are worked by the farmers. (See 107 Cong. Rec. (daily ed.) p. 5883.) The reason for the exemption does not justify its application to employes selling products and services to farmers otherwise than as an incidental and subordinate part of the business of a country elevator as commonly recognized. An establishment making such sales must be "such an establishment" to come within this exemption. An employer may, however, be engaged in the business of making sales of goods and services to farmers in an establishment separate from the one in which he provides the recognized country elevator services. In such event, the exemption of employees who work in both establishments may depend on whether the work in the sales establishment comes within another exemption provided by the Act. (See Remington v. Shaw (W.D. Mich.), 2 WH Cases 262, and infra, section 780.624.)

EMPLOYMENT OF "NO MORE THAN FIVE
EMPLOYEES"

Section 780.612 Limitation of exemption to establishments with five or fewer employees. If the operations of an establishment are such that it is commonly recognized as a country ele