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October 5, 1948

McCOMB, Adm'r of Wage and Hour Division, U.S. Dept. of Labor,

The opinion of the court was delivered by: FREED

The Administrator of the Wage and Hour Division of the United States Department of Labor demands a judgment permanently enjoining and restraining the defendant, Factory Stores Company, its officers and employees from violating the overtime compensation provisions of the Fair Labor Standards Act of 1938, Title 29 U.S.C.A. Sec. 201 et seq.

The matter is before the Court on the complaint of the Administrator, the answer of the defendant, the stipulations, the oral and written evidence presented at the hearing, the arguments of counsel and comprehensive briefs of the respective parties.

 The defendant, an Ohio corporation, with its principal office in Cleveland, Ohio, operates canteens, cafeterias and restaurants at industrial plants including the four units known as Units 38, 40, 45 and 47 on the premises of Republic Steel Corporation at Cleveland, Ohio, concerning which the instant controversy arises. The canteens and restaurants are operated under the provisions of a written agreement between the defendant and Republic, originally made in 1936, periodically renewed and now in effect as amended. The amendments, however, do not materially alter its general character.

 The agreement, inter alia, stipulates that the defendant is obliged at its expense to operate a general catering business for the employees of Republic at the various plants, or in such other locations as Republic may require and to furnish at all times good, wholesome food and numerous miscellaneous other items such as confections, soft drinks, tobacco, overalls, gloves, shop caps etc., as well as such other articles for which there may be a reasonable demand, at reasonable and current prices, to maintain efficient service, to arrange a schedule of operations for the service of hot food to correspond with the working hours of Republic in the respective locations and to supply service for both day and night forces subject to plant operations. The defendant is permitted to close certain of its units because of unprofitable operating conditions, but the curtailment of operations requires the full consent and approval of Republic. The agreement likewise provides that Republic shall have the privilege of authorizing an extension of such lunch service as Republic may deem advisable. When that privilege is exercised the defendant is charged with the obligation of operating new and existing office cafeterias and any other lunch service, and where no facilities are available, the defendant must establish fireproof canteens. Under its terms Republic furnishes the land on which the units are placed in operation and bears the cost of the original installation as well as the supplying of utilities. The defendant pays certain rentals, based upon a percentage of the gross receipts from the various canteens. There is no rental payment provided for the office cafeteria. The agreement further recites, that the defendant shall furnish coupon trade books for purchases at the canteens to such of its employees as are approved by Republic, and that Republic shall deduct from the wages of the employees payment for the coupon trade books and remit it to the defendant.

 Unit 38 is the cafeteria in the office building of Republic operated by the defendant. The equipment is owned in part by Republic and in part by the defendant. It consists of two rooms. One of the rooms is arranged in typical cafeteria style and is patronized by office employees of Republic and plant supervisors. The other room is furnished as a dining room and is set aside for the exclusive use of the executive, administrative and professional personnel of Republic. Office employees of Republic serve as waitresses in the dining room. This unit is open for business for an hour and a half each morning and noon, except for Sundays and holidays. Aside from food, confections and tobacco are sold at the cafeteria. The average number of daily sales in the cafeteria are 275 and the gross receipts for 1945 were $ 28,646.20 and for 1946 were $ 24,428.39.

 Unit 40 is located near the blast furnace department. The number of average daily sales in this canteen total 500. Except for the land all the property in connection with this operation is owned by the defendant. The blast furnace department operates twenty-four hours a day, seven days a week and employs approximately 591 men. The total receipts of the defendant at this canteen were $ 35,912.63 in 1945 and $ 41,338.35 in 1946. The canteen is open twenty-four hours a day, seven days a week.

 Unit 45 is near the open hearth department. Approximately 3513 employees work in the department and the operations are on a twenty-four hour continuous daily schedule. Except for the land all property at the canteen is owned by the defendant. The canteen is open twenty-four hours a day, seven days a week. The average daily sales number 1500 and the total receipts in 1945 were $ 141,077.38 and in 1946 were $ 130,075.45.

 Unit 47 is near the strip mill department. The building was erected and equipped by the defendant. All the property in connection with the operation of this unit except the land is owned by it. In June of 1946, the canteen building was destroyed by fire and until the completion of the present building in August of 1947, it was operated in a temporary structure. Approximately 2048 employees of Republic work in the strip mill department. In this canteen about 1800 sales are made each day. As the mill is on a twenty-four hour daily schedule, the canteen is open twenty-four hours a day, seven days a week. The gross receipts were $ 132,344.43 and $ 140,795.65 for the years 1945 and 1946 respectively.

 Approximately 77% of the defendant's gross receipts from the four units in question are derived from food items, soft drinks and candy and the balance from the sales of cigarettes and miscellaneous goods.

 The plant of Republic is located in the midst of the industrial section of the Cuyahoga River Valley, known as the 'Flats', covers a large area of about 540 acres and is enclosed by fences. It employs approximately 7000 workers. In this plant the wheels of industry turn continuously twenty-four hours a day. The men work in three eight-hour shifts. The Company rule prohibits the production workers from leaving the premises during the shifts they work, except in cases of emergency, so that when they enter the plant they invariably remain there until their working hours are concluded. With rare exceptions the men adhere strictly to this rule. Guards are stationed at the various gates to prevent the entrance of the general public to the plant.

 It is a well recognized steel mill custom, in vogue at the Republic plant, where the operations are continuous, not to have a definite lunch period. The men eat whenever they get an opportunity, so that it does not interfere with the performance of their duties. On such occasions they are allowed 15 to 20 minutes for their meals. In those few departments where the operations permit there is a set lunch period of a half hour.

 The location of the Republic plant, aside from the limitation of time for eating, makes it impractical for the men to eat at outside restaurants. They therefore have to rely on the food they bring in their lunch buckets, the food obtainable from a few lunch wagons and on the food bought at the canteens of the defendant, for their nourishment during the work day. Even the men who are given a half hour lunch period, would find it very difficult if not impossible with the available transportation facilities, to make the necessary trips to outside restaurants during the time permitted, so that they too rely on the lunch bucket, the lunch wagon and the defendant's canteens.

 Steel mill operations require that on frequent occasions men be asked to work an additional eight-hour shift without advance notice. Prior to the time when the defendant's canteens were on the premises, the foremen went to an outside restaurant and purchased at Republic's expense sufficient food to supply those working double shifts. Since the canteens were installed, however, each man is given an order for a sixty cent meal by Republic for which he obtains food at the defendant's canteens. In the year 1945, Republic paid defendant for 75,135 such orders, occasioned by the men working extra shifts.

 Most of Republic's workmen patronize the canteens. They either buy their entire meal, or supplement the contents of their lunch buckets by purchases of various food items, at the canteens. Those who are able to leave their work go to the canteens to consume their food. In order to afford men an opportunity to obtain food, coffee, candy and cigarettes from the canteens at times when they are compelled to remain at their work, the practice has developed of the foremen appointing Republic employees as 'Canteen boys' for their respective departments. The 'Canteen boys' take orders from their fellow employees, go to the canteens, have the orders filled and deliver them to the men in boxes made in the carpenter shop of Republic for that purpose. Each purchase made by the 'Canteen boys' is recorded by defendant as a single transaction.

 In addition to the employees of Republic the personnel of the River Terminal Railway Company, a wholly owned subsidiary of Republic, the crews of freighters tied up at Republic docks and the drivers who are loading or unloading trucks on Republic premises have access to defendant's canteens. But aside from these casual patrons of the canteens, the defendant caters solely to the 7000 workers of Republic.

 On the basis of these recited facts as gleaned from the evidence, the Administrator contends that the cafeteria and canteen employees, with the exception of those who are employed in an administrative capacity, are entitled to the ...

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