Divisions' test of what is 'selling or servicing in intrastate commerce' is too narrow, and whether the courts may broadly hold that no selling or servicing which constitutes engagement in commerce or in the production of goods for commerce is 'in intrastate commerce' for purposes of the exemption, even though all elements of the transaction take place within the same State." 19

In order to meet this situation, the Administrator recommended that "statutory language be added to the present section (13) (a) (2)” providing that

an establishment shall not be deemed to be a retail or service establishment if more than 25 percent of its semiannual gross receipts is derived from activities other than (1) selling or servicing to private individuals for personal or family consumption; (2) selling or servicing (but not for resale) to any type of customer if neither the type nor the quantity of goods sold or serviced differs materially from the type or quantity characteristic of the transactions described in (1) above; (3) selling to farmers, or servicing for farmers, goods of types and quantities used by the ordinary farmer in his farming operations. The amendment

should further provide that for the purpose of section 13 (a) (2) selling or servicing in intrastate commerce shall be deemed to include any selling or servicing transaction in which no element of the transaction takes place outside the State where the establishment is located and no transportation, transmission, or communication across State lines is involved.20

The purpose of these proposals was to give an uncontroversial legal foundation to the Administrator's interpretation of the retail and service establishment exemption as contained in the original act. The Administrator, however, added explicitly:

It is not intended by this proposal to suggest that there should not be a reconsideration of this exemption in order to restrict it to the typical retailer serving householders in his neighborhood. During the last session of Congress proposals were made for eliminating the exemption for chain organizations as well as for independent retail establishments handling a substantial volume of commodities. The Administrator believes there is a great deal of merit in a proposal to eliminate the exemption for retail enterprises with farflung interstate operations which have substantial interstate effects but he is not prepared to make a specific recommendation at this time on the precise type of standard to be used to define the kind of retail enterprise which should be brought under the act. He does feel, however, that the act should not be made applicable to the vast majority of small local retail merchants serving their own community.21

The 1949 report does not mention the retail exemption but Congress modified this exemption in 1949 in various ways:

(1) Section 13 (a) (2) of the original act was rewritten. Instead of simply exempting "any employee engaged in any retail or service establishment the greater part of whose selling or servicing is in intrastate commerce" the new section 13 (a) (2) exempts-

any employee employed by any retail or service establishment more than 50 per centum of which establishment's annual dollar volume of sales of goods or services is made within the State in which the establishment is located. A "retail or service establishment" shall mean an establishment 75 per centum of whose annual dollar volume of sales of goods or services (or of both) is not for resale and is recognized as retail sales or services in the particular industry.

The amended exemption (a) introduces the 75 percent rule previously used by the Administrator (b) defines "intrastate" in terms of the sales volume made within the State and (c) substitutes "employed by" for "engaged in" which broadened the exemption by making it applicable "to employees of retail or service establishments

1 Ibid., 120. The Court decisions in question are the following: J. Boutell Service Co. v. Walling, Roland Electric Co. v. Walling, and Martino v. Michigan Window Cleaning Co. 30 Ibid., p. 121.

11 Ibid., pp. 122, 123.

who perform their work awa men, repairmen and service The Administrator state was "to confirm and to clari 1938." 23 But he added tha and that special studies are office supplies, coal, lumbe tires and tire recapping, ice,

(2) Besides amending sec provision, section 13 (a) (4), any employee employed by an es establishment under clause (2) o establishment in the particular ind makes or processes at the retail e That more than 85 per centum of sales of goods so made or processe lishment is located.25

This provision exempts bakery pastries they sell; ice plants which or candy kitchens which make th which make alterations on suits ar drugstores which prepare prescrip food; frozen-foods locker plants w dealers who receive finished or sem forth.

(3) The 1949 amendments laundry and similar establishn the retail nature of the busines

The 1951 report of the Admi significant of the 1949 amendm minimum wage and overtime establishments." 26 The report determining whether a transact the particular industry" (sec. 1 in a firm "recognized as a retail try" (sec. 13 (a) (4)). In ord arose, the Wage and Hour Div stationery trade, the lumber an feed, and ice industries. It also tombstone industry and the findings of these and other cases

22 U. S. Department of Labor, Annual Report 1950, p. 223. See also above p. —.

The kind of employees excluded by this amendm ers produce goods for interstate commerce; (2) en homes and dwellings which are leased by interstate ently owned and operated restaurants located in fac in selling all of their fertilizer to local farmers within are grown and processed within the State and ship and processing or transporting of stones for local use merce; (6) employees of local window-cleaning comp customers of these companies are engaged in inters commerce; (7) certain types of employees of local, ind architectural firms; (9) certain employees of local ext local real-estate offices, local coal dealers, etc.; (11) er (12) employees in the production of sawmill equipme ployees of soft-drink plants who perform local pick engaged in the construction of buildings for interest structures are not used to produce goods for commerc 23 Ibid., p. 224.

24 Ibid., p. 225.

25 FLSA of 1938 as amended sec. 13 (a) (4).

26 U. S. Department of Labor 1951 Annual Report of

27 Ibid. pp. 25, 26.

ND FAIR LARG

illetin, Part 779. However, certain questions in regard to "recogthe stazed as a retail sale" and "recognized as a retail establishment" lectors.mained.

the pars The 1952 report of the Administrator indicates that "significant exemptore ogress has been made on these questions." 28

remains The 1953 report notes the continuance of "serious difficulty" in made in raking certain determinations of "recognized" sales or establishbuildingents.29 Since recognition "in" the industry and not "by" the induslery is expressly stipulated, the opinion of a wide group of people or (a) 2sociations has to be taken into consideration. The report stated: empts In most industries there have been clear concepts of retail recognition and the terion set by the act can be applied. These are the industries in which the aditional patterns of distribution are followed. Great difficulty has been countered, however, in those industries which do not follow the usual distribuon patterns, but in which the same establishments deal extensively with large mmercial and industrial customers as well as the personal consumer and the all-business firm.30

Even by 1954 these difficulties were not completely resolved though nsiderable progress has been made.

Industrywide determinations stating which sales and establishments are recog zed as retail were issued for commercial stationers and school-supply distributors d for the feed industry. At the year's end, several other industrywide deterinations were nearing completion, including those for the coal industry, the tomotive trades, and tire dealers.31

New problems arose as the wholesalers of automotive parts estabshments covered by the act complained about competition from tail auto dealers who are also engaged in wholesaling auto parts.32 However, the major problem to be solved is the large number of nployees in retail trade not protected by the minimum wage and aximum-hour stipulations of the Fair Labor Standards Act. In eptember 1953 about 24 out of 48 million wage and salary carners ere not covered by the Fair Labor Standards Act. Retail trade as the largest single group not covered by the act: Only about 30,000 employees or about 3 percent of the total number of 7.6 illion wage and salary earnings in the retail trade (including eating nd drinking places) were protected by the act. About 5.6 million r approximately 73 percent of the employees were not protected ecause the clause "industries engaged in commerce" excludes them om interstate commerce. About 1.1 million employees or about 5 percent were not protected because they were specifically exempt nder section 13 of the act. The rest, about 700,000 or about 9 ercent of the total number of employees, were not protected because hey were executive, administrative, and professional employees.33 For detailed data see p. 22.)

As we have seen above, the coverage of the act has been narrowed ather than widened during the past 10 years. This trend is in sharp ontrast to the increasing concentration in the retail trade and the ominant role which large-scale enterprise plays in certain branches f retailing. The next section will throw light on these developments.

U. S. Department of Labor Wage and Hour and Public Contracts Divisions 1952 Annual Report, p. 37. U. S. Department of Labor Wage and Hour and Public Contracts Division, 1953 Annual Report, p. 25. 30 Ibid., p. 25.

U. S. Department of Labor 1954 report of the Wage and Hour and Public Contracts Divisions, p. 33. 22 See Ibid., p. 33.

33 See 84th Cong., 1st sess., staff report to the Subcommittee on Labor of the Committee on Labor and ublic Welfare, U. S. Senate, on amendment of the Fair Labor Standards Act of 1938, as amended, Washigton, 1955, p. 14.

who perform their work away from the establishment, such as deliverymen, repairmen and servicemen, collectors, buyers, etc." 22

The Administrator stated that the purpose of the amendments was "to confirm and to clarify the exemptions as originally enacted in 1938." 23 But he added that there remains a need for interpretation and that special studies are to be made in regard to "stationary and office supplies, coal, lumber, and building materials, automobiles, tires and tire recapping, ice, feed dealers, and locker plants." 24

(2) Besides amending section 13 (a) (2), Congress added a new provision, section 13 (a) (4), which exempts

any employee employed by an establishment which qualifies as an exempt retail establishment under clause (2) of this subsection and is recognized as a retail establishment in the particular industry notwithstanding that such establishment makes or processes at the retail establishment the goods that it sells: Provided, That more than 85 per centum of such establishment's annual dollar volume of sales of goods so made or processed is made within the State in which the establishment is located.25

This provision exempts bakery establishments which bake the bread and pastries they sell; ice plants which manufacture the ice they sell; ice cream parlors or candy kitchens which make their own ice cream or candy; clothing stores which make alterations on suits and clothing; grocery stores which grind coffee; drugstores which prepare prescriptions; restaurants which process their own food; frozen-foods locker plants which also include a retail market; monument dealers who receive finished or semifinished marble, granite and the like; and so forth.

(3) The 1949 amendments added also a special exemption for laundry and similar establishments which is not any more based on the retail nature of the business.

The 1951 report of the Administrator stated that "among the most significant of the 1949 amendments were those affecting the existing minimum wage and overtime pay exemptions for retail and service establishments." 26 The report attracted attention to the new test determining whether a transaction is "recognized as a retail sale in the particular industry" (sec. 13 (a) (2)) and whether an employee is in a firm "recognized as a retail establishment in the particular industry" (sec. 13 (a) (4)). In order to solve the new problems which arose, the Wage and Hour Division held hearings dealing with the stationery trade, the lumber and buildings material trade, the coal, feed, and ice industries. It also made rulings in the monuments and tombstone industry and the frozen-food locker industry." The findings of these and other cases were incorporated into Interpretative

22 U. S. Department of Labor, Annual Report of the Wage and Hour and Public Contracts Divisions, 1950, p. 223. See also above p. -.

The kind of employees excluded by this amendment were (1) employees of local merchants whose custom ers produce goods for interstate commerce; (2) employees engaged in maintaining and repairing private homes and dwellings which are leased by interstate producers to their employees; (3) employees of independ ently owned and operated restaurants located in factories; (4) employees of local fertilizer companies engaged in selling all of their fertilizer to local farmers within the State for use on land on which agricultural products are grown and processed within the State and shipped out of the State; (5) employees of quarries, mining, and processing or transporting of stones for local use within the State for projects producing goods for com merce; (6) employees of local window-cleaning companies doing business wholly within the State where the customers of these companies are engaged in interstate commerce or in production of goods for interstate commerce; (7) certain types of employees of local, independent plant nurseries; (8) certain employees of local architectural firms; (9) certain employees of local exterminator firms; (10) maintenance employees of certain local real-estate offices, local coal dealers, etc.; (11) employees providing recreational housing facilities, etc.; (12) employees in the production of sawmill equipment for intrastate sale to producers in commerce; (13) em ployees of soft-drink plants who perform local pickup and local delivery of bottles, and (14) employees engaged in the construction of buildings for interestate factory employees, schools, churches, etc., where structures are not used to produce goods for commerce.

23 Ibid., p. 224.

24 Ibid., p. 225.

25 FLSA of 1938 as amended sec. 13 (a) (4).

6 U. S. Department of Labor 1951 Annual Report of the Wage and Hour and Public Contracts Divisions, p. 23. 27 Ibid. pp. 25, 26.

Bulletin, Part 779. However, certain questions in regard to "recognized as a retail sale" and "recognized as a retail establishment" remained.

The 1952 report of the Administrator indicates that "significant progress has been made on these questions." 28

The 1953 report notes the continuance of "serious difficulty" in making certain determinations of "recognized" sales or establishments.29 Since recognition "in" the industry and not "by" the industry is expressly stipulated, the opinion of a wide group of people or associations has to be taken into consideration. The report stated:

In most industries there have been clear concepts of retail recognition and the criterion set by the act can be applied. These are the industries in which the traditional patterns of distribution are followed. Great difficulty has been encountered, however, in those industries which do not follow the usual distribution patterns, but in which the same establishments deal extensively with large commercial and industrial customers as well as the personal consumer and the small-business firm.30

Even by 1954 these difficulties were not completely resolved though considerable progress has been made.

Industrywide determinations stating which sales and establishments are recognized as retail were issued for commercial stationers and school-supply distributors and for the feed industry. At the year's end, several other industrywide determinations were nearing completion, including those for the coal industry, the automotive trades, and tire dealers.31

New problems arose as the wholesalers of automotive parts establishments covered by the act complained about competition from retail auto dealers who are also engaged in wholesaling auto parts.32 However, the major problem to be solved is the large number of employees in retail trade not protected by the minimum wage and maximum-hour stipulations of the Fair Labor Standards Act. In September 1953 about 24 out of 48 million wage and salary earners were not covered by the Fair Labor Standards Act. Retail trade was the largest single group not covered by the act: Only about 230,000 employees or about 3 percent of the total number of 7.6 million wage and salary earnings in the retail trade (including eating and drinking places) were protected by the act. About 5.6 million or approximately 73 percent of the employees were not protected because the clause "industries engaged in commerce" excludes them from interstate commerce. About 1.1 million employees or about 15 percent were not protected because they were specifically exempt under section 13 of the act. The rest, about 700,000 or about 9 percent of the total number of employees, were not protected because they were executive, administrative, and professional employees.33 (For detailed data see p. 22.)

As we have seen above, the coverage of the act has been narrowed rather than widened during the past 10 years. This trend is in sharp contrast to the increasing concentration in the retail trade and the dominant role which large-scale enterprise plays in certain branches of retailing. The next section will throw light on these developments. "U. S. Department of Labor Wage and Hour and Public Contracts Divisions 1952 Annual Report, p. 37. U, S. Department of Labor Wage and Hour and Public Contracts Division, 1953 Annual Report, p. 25. * Ibid., p. 25.

U. S. Department of Labor 1954 report of the Wage and Hour and Public Contracts Divisions, p. 33. See Ibid., p. 33.

See 84th Cong., 1st sess., staff report to the Subcommittee on Labor of the Committee on Labor and Public Welfare, U. S. Senate, on amendment of the Fair Labor Standards Act of 1933, as amended, Washington, 1955, p. 14.