UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT
filed: January 6, 1994; As Corrected January 31, 1994. As Corrected April 11, 1994. As Corrected February 3, 1994.
ROBERT REICH,*FN* SECRETARY OF LABOR, UNITED STATES DEPARTMENT OF LABOR, APPELLANTS IN NO. 92-3746
GATEWAY PRESS, INC.; JOHN BLANCHFLOWER, INDIVIDUALLY AS EMPLOYER AND AS VICE-PRESIDENT OF GATEWAY PRESS, INC., APPELLANTS IN NO. 92-3747
On Appeal From the United States District Court for the Western District of Pennsylvania. D.C. Civil No. 90-00458.
Before: Becker, Nygaard and Alito, Circuit Judges.
Opinion OF THE COURT
BECKER, Circuit Judge.
These cross appeals require us to decide the extent to which newspaper reporters who write for small community newspapers that are part of a newspaper chain are exempt from the wage, hour and records requirements of the Fair Labor Standards Act of 1938, 29 U.S.C. § 201 et. seq. ("FLSA" or the "Act"). Involved are two exemptions from the FLSA: the "small newspaper" exemption, § 13(a)(8), which exempts newspapers with circulations of less than four thousand; and the "executive, administrative and professional employee" exemption, § 13(a)(1), which exempts managerial and professional employees. Interestingly, we are the first court of appeals to construe the scope of the small newspaper exemption in the fifty-five years since its enactment.
This case arose when the Secretary of Labor (the "Secretary") sued Gateway Press, Inc. ("Gateway"), a publisher of nineteen community newspapers serving the Pittsburgh suburbs, claiming that Gateway had willfully violated the minimum wage, overtime, and records requirements of the FLSA with respect to the wages it had paid its reporters. Gateway's primary defense was that the FLSA did not cover its actions. It argued that all but six of its nineteen newspapers fell within the scope of the small newspaper exemption and that, in any event, its reporters were exempt as "professional" employees. Gateway also contended that any violations it may have committed were not willful.
After a six-day bench trial, the district court held that Gateway had violated the FLSA, but that Gateway's violations were limited to only those reporters who had worked for six of the nineteen Gateway papers. The court decided that thirteen of the nineteen papers were within the scope of the small newspaper exemption because each of them had circulations below four thousand. It rejected the Secretary's argument that the court should look to the aggregate circulation of the nineteen papers (or at least to the circulations of the five groups into which the papers were organized) rather than the individual circulations when applying the small newspaper exemption. However, the district court held that none of the reporters were exempt employees, rejecting Gateway's argument that all of its reporters were exempt as "professional" employees under § 13(a)(1). Additionally, the court: (1) held that Gateway's violations were not willful; (2) denied back pay to reporters who did not testify at trial; and (3) held that a data processing manager for Gateway, Thomas Gault, was exempt from the wage and hour requirements because he was an "administrative" employee under § 13(a)(1).
For the reasons that follow, we hold that the district court erred in its application of the small newspaper exemption to the Gateway papers. More specifically, the district court should have used an inquiry similar to the inquiry required to determine "enterprise" liability under the FLSA. Under the FLSA, businesses that engage in related activities, under unified operation or common control, and for a common business purpose constitute an enterprise and will be treated as a single entity for purposes of applying the FLSA. Among other things, the enterprise concept aggregates the sales of affiliated businesses to determine whether the businesses have sufficient sales volume to come within the scope of the FLSA.
We conclude that the district court should have aggregated the circulation of those publications in the Gateway chain that engaged in related activities, under unified operation and control, for a common publishing purpose. Applying that approach to this case, the circulation of the papers within each of the five groups should have been aggregated. Because the combined circulations of the papers within each geographic group is more than four thousand, we hold that none of the Gateway papers qualify for the small newspaper exemption, and reverse the judgment of the district court to that extent.
We agree with the district court that none of the Gateway reporters come within the scope of the professional employee exemption. We therefore hold that all of the Gateway reporters are entitled to the protections of the FLSA, and affirm the district court on this point. In light of our Conclusions on the small newspaper and professional employee exemptions however, we must remand so that the court's decision on back wages may be reconsidered. We disagree with the district court's Conclusion that the failure to testify at trial is necessarily fatal to an employees claim for back wages, for there are other modes of proof. But the record in this case is so poorly developed that failure to testify may in fact prove fatal, though the district court may, of course, seek further development of the record. Finally, we affirm the district court's decisions on willfulness and on the administrative employee.
I. THE FACTS
The Organization and Operation of the Gateway Newspapers
Gateway is a printing and publishing company based in Monroeville, Pennsylvania, that publishes nineteen weekly papers which serve the Pittsburgh suburbs. Although they are part of a chain and share many common features, each of the papers is also
local in orientation and outlook. [A 18]. Each is filled with information about the day-to-day events of their respective local communities -- marriages, births, deaths, school events, senior citizen and church activities, local crime reports, local political items, et alia -- overlooked by the Pittsburgh metropolitan daily press.
Gateway maintains strict control over both the organization and content of each of the papers. Although the papers serve different communities, ranging from Moon Township (in the west) to Plum Borough (in the east), major decisions about administration and editorial policy are made from the central office in Monroeville. For example, the publisher*fn1 decides how many pages will be in each edition;*fn2 Edith Hughes, the managing editor, oversees all editorial decisions for all nineteen papers, [A 17-18, 758-59]; the Monroeville office sells all advertising, makes all employment-related decisions (hiring, firing, payroll), [A 759, 795], and does all the printing. [A 798].
Gateway has organized the nineteen different papers into five regional groups: East, West, North, South and Carnegie. [A 49-50].*fn3 These groups are the basic administrative and editorial units of the Gateway chain of papers. For example, the newspapers in each group operate out of the same office and have the same editor [A 921, 940, 955, 970, 973, 1004, 1025, 1074]; they have common operating budgets. [A 795, 836-837]. Generally, the reporters and editors work on some or all of the papers within a group. [A 288, 23, 511, 934, 939, 974] In fact, Gateway's payroll records do not reflect whether a reporter worked for one or another of the papers within a group. [A 749-750, 923, 967-68, 975, 1104].
In addition, Gateway uses the circulation numbers of the groups--not the individual papers--when selling its advertising space. [A 115]. For example, in Gateway's 1989 Advertising Information and Rate Card [A 110], Gateway included under "Circulation":
Publisher is a member of and audited by Certified Audit of Circulations, Inc. (CAC)
Average circulation for six months ended June 30, 1988
Including Cranberry Review Journal 11,775 (Subject to CAC audit)
Total Market 61,122
The content of the papers within each group is quite similar. A typical Gateway paper has three sections. The first section contains the masthead and some pages of local news specifically pertinent to the community the paper serves. Other pages in the first section contain features and editorials common to the other papers in the regional group. The other two sections, sports and classified advertisements, contain articles and advertisements identical to those appearing in the other papers in the regional group. [A 22].
The Duties of Gateway's Reporters
Because local reporting is the life blood of the Gateway papers, Gateway requires each of its reporters to have a working knowledge of the community to which the reporter is assigned. Reporters primarily generate articles and features using what they have learned about the community, but they also write articles at the direction of their local editors, or of the executive editor, Hughes. [A 20].
Typically, most of the reporters' time (50%-60%) is spent accumulating facts. [A 1003-1005, 1023-1026, 1035, 1073-74]. In fact, most articles are either recast press releases issued under headings such as "what's happening," "church news," "school lunch menus," and "military news" or information taken from the police blotter, obituaries or real estate transaction reports. [A 20]. About once a month a reporter writes a feature article or an editorial.
Gateway's Overtime Policy
Gateway pays its reporters a weekly salary. Gateway's official policy is that reporters are not to work more than 40 hours per week. [A 123] Sometimes, if a reporter needs to work additional hours to complete a story, he or she may get advance approval from Gateway to be paid for the extra work. [A 22]. When reporters need to work more than 40 hours to put out the paper, Gateway tells the reporters to offset any overtime with "compensatory time." That is, they are supposed to work fewer hours on other days during the week to reduce their total weekly hours to 40.*fn4
Gateway does pay some money to reporters over and above their salary. The paper awards a $25.00 bonus for extra quality work and occasionally gives extra compensation for especially difficult assignments. [A 22]. And Gateway occasionally pays reporters time-and-a-half for overtime work. [A 312-313, 494].
The Secretary brought this action because, despite Gateway's official policy, reporters routinely work more than 40 hours per week and Gateway does not pay them for the additional hours that they work. Gateway's unofficial policy is that time slips should not total more than forty hours regardless of how many hours the reporter actually has worked. Gateway editors have told reporters that they would not be paid overtime for working more hours. In some cases, Gateway's editors have even returned time slips totalling more than 40 hours to reporters who had recorded their actual hours, telling the reporters to revise their pay slips to reflect forty hours or find work elsewhere. [A 316-320]. Knowing about this practice, the reporters themselves often put incorrect totals of hours on their time slips.
II. PROCEDURAL HISTORY AND THE DISTRICT COURT OPINION
The Secretary brought this action on March 15, 1990 under §§ 6, 7, 11(c), 15(a)(3) and 15(a)(5) of the FLSA. 29 U.S.C. §§ 206, 207, 211(c), 215(a)(3), 215(a)(5).*fn5 The Secretary sought to enjoin Gateway and Blanchflower from violating the FLSA's minimum wage, overtime and recordkeeping requirements. The Secretary also sought unpaid minimum wages and overtime pay for Gateway's reporters, stringers, part time reporters, photographers and a data processing manager. Additionally, the Secretary claimed that three years of back pay were appropriate rather than the normal two, because Gateway's violations had been willful under 29 U.S.C. § 255(a).
As noted above, Gateway defended itself by claiming that its employees were exempt from the FLSA on two grounds. First, Gateway argued that its employees worked for small newspapers which are exempt under § 13(a)(8) of the Act. Second, Gateway claimed that its employees were professional employees and therefore were exempt under § 13(a)(1) of the Act.
Following a six-day bench trial, the District Court filed an opinion holding that Gateway owed back wages only to the reporters who had worked for six of the nineteen newspapers. The court ruled that the § 13(a)(8) small newspaper exemption applied to all the Gateway papers except the six papers which had circulations of more than four thousand. The court rejected the Secretary's argument that the nineteen different newspapers were, for all practical purposes, the same newspaper and that the circulation of all of the nineteen papers should be aggregated before applying the exemption; when combined, the circulation of the Gateway papers was around sixty thousand, which would easily have taken the papers outside the scope of the exemption.
In reaching this Conclusion, the court primarily relied on a 1965 opinion letter issued by the Wage and Hour Administrator which stated that
Opinion Letter 376, Wages-Hours Reports (CCH) P 30,988 (June 29, 1965). According to the court, since the nineteen papers had different mastheads and different local news items, the circulations of the papers should be considered separately. [A 32].
Having disposed of the small newspaper exemption issue, the district court turned to the application of the professional employee exemption. The court held that the reporters were not professional employees within the scope of § 13(a)(1). In reaching its Conclusion, the court looked to the definition of "professional" employees in the Secretary's regulations, 29 C.F.R. § 541.3, and interpretations, 29 C.F.R. § 541.303. The interpretations require that a reporters' writing be "'predominantly original and creative'" to be exempt. 29 C.F.R. § 541.303(f)(1).
Following this standard, the District Court found that "while some of [the reporters'] work involved investigative reporting, features, and editorials," their job was "predominantly to fill pages by gathering facts about routine community events and reporting them in a standard format." [A 33-34]. Because these duties were not "predominantly original and creative," it concluded that the reporters were not "professional" employees within the scope of § 13(a)(1). [A 34]. The court made no distinction in its analysis between reporters who made more than $250 per week and those who made less than $250, notwithstanding the provision in the regulations that requires the court to engage in different tests for professional status depending on whether the employee makes $250 or more.
The court then held that Gateway had not willfully violated the FLSA. Relying on McLaughlin v. Richland Shoe Co., 486 U.S. 128, 100 L. Ed. 2d 115, 108 S. Ct. 1677 (1988), the district court reasoned that Gateway's defenses raised sufficiently legitimate and close questions of law and fact that its actions were not willful violations of the FLSA. [A 35].
The court also held that the Secretary had not proved that Gateway owed back wages for those employees who did not testify at trial. [A 36-37]. The evidence that the Secretary introduced to prove the amount of back wages owed to the reporters did not indicate which papers employed the non-testifying reporters. [A 37]. Because the court had no way of knowing which of the non-testifying employees had worked for the non-exempt papers, it could not determine which non-testifying reporters were covered by the exemption and which were not. [A 37]. As a result, it awarded back wages only to those reporters who had testified at trial.*fn6
Following the entry of final judgment, both the Secretary and Gateway filed timely notices of appeal. The Secretary appealed the district court's orders concerning the small newspaper exemption, willfulness, and back wages to non-testifying reporters. Gateway appealed the district court's decision that the reporters were not professional employees. Albany Business Journal, Inc. filed an amicus brief in support of Gateway's appeal.
III. THE FLSA EXEMPTIONS
The Standard of Review
Whether the Gateway newspapers fall within the scope of the small newspaper exemption and whether the Gateway reporters are within the scope of the professional employee exemption are each mixed questions of law and fact. We review the district court's findings of fact (both evidentiary facts and inferences from those facts) under the "clearly erroneous" standard of Fed. R. Civ. P. 52(a). Martin v. Cooper Electric Supply Co., 940 F.2d 896, 900 (3d Cir. 1991). Our review of the district court's interpretations and application of the exemptions is plenary. Tudor Dev. Group, Inc. v. United States Fidelity and Gaur. Co., 968 F.2d 357, 359 (3d Cir. 1992); Cooper Electric Supply, 940 F.2d at 900.
B. The "Small Newspaper" Exemption
Sections 6 and 7 of the FLSA guarantee most employees a minimum wage and overtime pay. 29 U.S.C. §§ 206, 207. Section 13(a)(8) of the FLSA, however, exempts "any employee employed in connection with the publication of any weekly, semi-weekly, or daily newspaper with a circulation of less than four thousand the major part of which circulation is within the county where published or counties contiguous thereto." 29 U.S.C. § 213(a)(8).
1. The Extant Authority.
Neither the statute nor the legislative history directly indicate under what circumstances a court should combine the circulations of related publications when applying the exemption. Moreover, there are no appellate decisions on point. Gateway finds support in two Wage and Hour Division opinion letters interpreting the exemption, while the Secretary relies on a forty-three year old district court opinion, McComb v. Dessau, 89 F. Supp. 295 (S.D. Cal. 1950). Unfortunately, none of these authorities give a reliable answer to this question.
The Wage and Hour Division opinion letters are from 1946 and 1965. Although the 1946 opinion letter indicates that a publisher of more than one newspaper may treat each paper separately for the purposes of determining whether the circulation is less than the maximum indicated in § 13(a)(8), it qualifies this statement by stating that where "the purported separate publications are properly to be regarded as one and the same newspaper, the total circulation of both papers would have to be considered in determining whether the exemption is applicable." 1948 Wage and Hour Manual (BNA) P 15:328. Thus the 1946 letter merely poses, without answering, the question presented here: what publications are properly regarded as the same newspaper?
The 1965 opinion letter is not helpful either. As has been mentioned above, the 1965 letter states that "when a company publishes more than one newspaper, each newspaper is tested separately in order to determine whether the circulation is less than four thousand, provided that, in addition to their separate mastheads, the several newspapers carry different local news items." Opinion Letter 376, Wages-Hours Reports (CCH) P 30,988 (June 29, 1965). But what percentage of each paper needs to be local? Is a single local item sufficient? Or must all of the stories be different? The letter does not say, apparently because the Administrator deliberately wanted to leave the standard unclear, preferring instead to decide things on a case by case basis. Id.*fn7
More importantly, the 1965 opinion letter's "different local news items" standard seems to have been ignored in an opinion letter issued just four years later. A 1969 Wage and Hour opinion letter states that a publisher of a newspaper with a circulation of less than four thousand would not be exempt under § 13(a)(8) because it printed a military newspaper with a circulation of more than four thousand. Opinion Letter 973, Wages-Hours Reports (CCH) P 30,511 (March 27, 1969).*fn8 Despite the fact that the publisher did no more than handle the advertising and printing of the military newspaper and that only his printing employees worked on both papers, the administrator thought that the publisher could not have the circulation of the two papers counted separately for purposes of the exemption. Id. at P 30,512. The Wage and Hour Division said nothing about the "different local news items" standard.
We do not cite the 1969 opinion letter because its reasoning is more persuasive than the 1965 letter. Rather, the 1969 opinion letter merely illustrates the inconsistency and vagueness of the agency interpretations of this exemption. Normally we must give considerable weight to agency interpretations expressed in opinion letters. Pension Guaranty Corp. v. LTV Corp., 496 U.S. 633, 110 S. Ct. 2668, 2676, 110 L. Ed. 2d 579 (1990) (Chevron deference appropriate for opinion letters); Chevron U.S.A., Inc. v. National Resources Defense Council, Inc., 467 U.S. 837, 104 S. Ct. 2778, 81 L. Ed. 2d 694 (1984); Skidmore v. Swift & Co., 323 U.S. 134, 140, 65 S. Ct. 161, 164, 89 L. Ed. 124 (1944). Such weight need not be given, however, when the interpretations are, like these, inconsistent, not contemporaneous to the enactment of the statute, and stale (the most recent one in this case being twenty-four years old). See Barnett v. Weinberger, 260 U.S. App. D.C. 304, 818 F.2d 953, 961-62, nn.73 and 74 (D.C. Cir. 1987) (marshalling the case law discussing the proposition that "the prestige of a statutory construction by an agency depends crucially upon whether it was promulgated contemporaneously with enactment of the statute and has been adhered to consistently over time"). See also Lynn Martin v. Occupational Safety and Health Review Commission, 499 U.S. 144, 111 S. Ct. 1171, 113 L. Ed. 2d 117 (1991) (stating that the consistency of application of interpretations bears on the reasonableness of the agency's position under Chevron); Batterton v. Francis, 432 U.S. 416, 425 n.9, 97 S. Ct. 2399, 2405 n.9, 53 L. Ed. 2d 448 (1977) (explaining that "varying degrees of deference are accorded to administrative interpretations, based on such factors as the timing and consistency of the agency's position, and the nature of its expertise.").*fn9
The Secretary submits that we ought to follow the analysis in the Dessau case. In Dessau, the defendants published four weekly newspapers. 89 F. Supp. at 296. All of the writing, editorial and printing work was done from the same location by the same employees. Id. at 297-98. Each paper had a different masthead, and circulated among different groups of subscribers. Id. Otherwise, the papers were virtually identical. The court held that where a publisher published four papers from the same location, had the same employees working on each of them, made no distinction respecting payroll among the papers, and where the other papers had no real distinct corporate or business identity, the circulation of all four should be combined in determining whether the small newspaper exemption applied. Id.
Although Dessau is apparently the only case specifically discussing the question of when aggregation of the circulation of a publisher's different papers is appropriate, we believe that it is distinguishable. Unlike the papers in Dessau, the papers in the Gateway chain clearly have different stories, advertisements and editorial oversight. And although much of the content and operation of the Gateway papers is centralized, much of it is not. In addition, Dessau does not provide a clear framework for analyzing the question of when circulations should be aggregated. The two important facts listed in Dessau that apply to the Gateway newspapers--a lack of a separate corporate identity and the existence of a unitary employer/employee relationship--suggest something like a unitary business operations analysis. But it is not clear how such an analysis fits with the interpretation of the Wage and Hour Division that a single publisher can print more than one newspaper and still fall within the scope of the exemption.*fn10 We assume that at least some degree of centralization of business operations can occur without automatically requiring that the circulation of the different publications be aggregated. Unfortunately, Dessau does not indicate how much centralization is acceptable under the exemption, in part because it does not ground its analysis in the FLSA statutory scheme.
The Secretary attempts to overcome Dessau 's shortcomings by combining Dessau with the Wage and Hour opinion letters and proposing a two part test: "(1) whether the newspapers are properly regarded as one and the same based on their integrated operations, and (2) whether the newspapers contain different news items." [Secretary's Brief at 21]. Since this test is an interpretation created for purposes of this litigation, however, it is not entitled to deference. Bowen v. Georgetown University Hospital, 488 U.S. 204, 212, 109 S. Ct. 468, 473-74, 102 L. Ed. 2d 493 (1988). Absent deference, the test is unconvincing, for it draws an artificial line between the operations of the newspapers and their contents, and it essentially makes the unified business operation of a publisher sufficient to remove all of the publisher's publications from the scope of the exemption. Under such an approach, no publisher of more than a single paper who takes advantage of some economies of scale in operating the papers would have the circulations of the papers counted separately for purposes of applying the exemption.
Having determined that none of the authorities cited by the parties specifically resolves whether the circulation of the different Gateway papers ought to be combined, we look for guidance to the history of the exemption and the general purposes of the FLSA. We also keep in mind that, because the FLSA is a remedial statute, the Supreme Court has long held that exemptions from the FLSA are to be narrowly construed against the employer. Arnold v. Ben Kanowsky, Inc., 361 U.S. 388, 392, 80 S. Ct. 453, 456, 4 L. Ed. 2d 393 (1960).*fn11 As we explain below, we conclude that the FLSA's concept of "enterprise" provides the best analogy for determining to what extent a court should aggregate the circulation of different publications when applying the exemption.
2. The Enterprise Concept
The minimum wage and overtime requirements apply not only to employees who engage in commerce or in the production of goods for commerce, but also to employees of an "enterprise engaged in commerce." 29 U.S.C. §§ 206, 207. To be considered an enterprise, a business must satisfy three elements. It must 1) be engaged in related activities, 2) under unified operation or common control, and 3) have a common business purpose. 29 U.S.C. § 203(r)(1); Cruz v. Chesapeake Shipping, Inc., 932 F.2d 218, 229 (3d Cir. 1991). If a group of businesses have these three characteristics, the businesses will be treated as a single entity for purposes of applying the FLSA.
Congress introduced the concept of enterprise coverage in order to cope with the dramatic change in the nature of retail businesses between 1938 and 1960. Originally the FLSA was designed to protect the employees of major industrial companies while leaving employees of small local businesses alone. In 1938, retailers were still mostly small local businesses, and they were largely excluded from the scope of the FLSA. By 1961, however, Congress recognized that much retailing was controlled by national chain type stores, and enacted a bill modifying the FLSA to bring such stores within the scope of the FLSA. By amending the FLSA Congress hoped to update it to take account of the changes in the marketplace:
Just as the general store has long since disappeared as a symbol of retailing, the corner grocery store is quickly giving way to the supermarket. . . . The large mercantile establishments and national systems of chain stores which this bill would make subject to the Federal Wage-hour law bear little resemblance to the small retail businesses the original sponsors of the act sought to exclude. Their claim to be regarded as local retail merchants rests solely on the fact that they distribute and sell goods at retail, although they commonly buy at wholesale and operate in many States throughout the Nation.
S. Rep. No. 145, 87th Cong., 1st Sess. (1961) reprinted in 1961 U.S.C.C.A.N. 1620, 1645-46. By introducing the enterprise concept, which aggregated different entities into a single unit for purposes of the FLSA, the 1961 amendment to the FLSA brought the national retail chain stores and their employees within the scope of the FLSA.
Of course, Congress still wanted to keep truly local businesses outside the scope of the FLSA. So Congress made "ample provision . . . to insure the original intent of the sponsors of the act to exclude the small local retail merchants such as the corner grocer, neighborhood drugstore, barbershop or beauty parlor [would be] carried out." 1961 U.S.C.C.A.N. 1645-46. Congress did this by creating a "mom and pop" exclusion, see Martin v. Bedell, 955 F.2d 1029, 1032 (5th Cir. 1992), requiring that an enterprise have gross sales of a certain amount for FLSA coverage to exist. At present, that amount is $500,000. 29 U.S.C. § 203(s)(1)(A)(ii).
Under current law, the question often arises as to whether a business is above or below this dollar threshold. For example, if an entrepreneur owns three businesses, e.g. a gas station, a factory, and a bank, with each having gross sales of $200,000, it is necessary for the court to determine whether the sales of one, two or all three of the businesses should be combined to determine the applicability of the FLSA. 29 C.F.R. § 779.211. The enterprise test is the way to determine whether to combine the dollar figures. See 29 C.F.R. § 779.201. By using the three part test for enterprise, courts have a way to gauge the economic reality of a group of affiliated businesses for the purposes of applying the FLSA. See, e.g., Brock v. Executive Towers, Inc., 796 F.2d 698 (4th Cir. 1986) (three affiliated businesses--a lounge that featured topless dancers, an adult bookstore, and an x-rated video arcade--were an enterprise because they were all engaged in providing erotic entertainment to adults); Brock v. Hamad, 867 F.2d 804, 806-7 (4th Cir. 1989) (two affiliated businesses--one that managed an apartment complex and one that managed single family homes--were an enterprise). Cf. Griffin v. Daniel, 768 F. Supp. 532, 536-37 (W.D. Va. 1991) (affiliated restaurant, grocery store and trailer park were not an enterprise).*fn12
The enterprise coverage concept aims at a distinction among businesses that is quite similar to the inquiry invited by the small newspapers exemption. If circulation figures are substituted for dollars, the problem of determining the application of the small newspaper exemption is the same as determining enterprise coverage. This is particularly true in this case in which we are called upon to apply the FLSA to a chain of newspapers. As we have noted, the enterprise concept was specifically introduced into the FLSA to deal with the problem of chains.
Use of the enterprise analysis as a rough framework for applying the exemption, not only has pragmatic appeal, but it also has support in the legislative history of § 13(a)(8). In 1938, Congress was careful to restrict the scope of the FLSA so that small, local businesses--the butcher, the baker, the grocer--would not be required to pay minimum wages and overtime. The vast majority of employers in the retail trades were either not covered by the act because their employees were not deemed to be engaged "in commerce" or "in the production of goods for commerce" or were specifically exempted by the retail trade exemption.*fn13 But because it was common for local newspapers to be sent across state lines--to former residents or relatives--many local publishers were engaged in commerce and fell within the general scope of the FLSA. Without an exemption from the FLSA, the local publisher, who was really just as small and community-based as other small businesses, would have had to meet the requirements of the FLSA.
As the sponsor of § 13(a)(8), Representative Creal of Kentucky, put it:
Congressional Record, 83rd Congress Session 1 7445.*fn14 See also Mabee v. White Plains Publishing Co., 327 U.S. 178, 66 S. Ct. 511, 513, 90 L. Ed. 607 (1946). ("The exemption of small weeklies or semi-weeklies seems to have been adopted on the assumption that without it a newspaper with a regular out of state circulation, no matter how small, would be under the act."). According to this legislative history, the small newspaper exemption is, at base, a provision to ensure that publishers would be treated the same as other businesses.
Using the enterprise concept when applying the small newspaper exemption seems to ensure an interpretation that is most consistent with this legislative history. If the original purpose of the small newspaper exemption is to be accomplished, publishers today ought to be treated no differently from other businesses. As has been mentioned, the enterprise approach distinguishes the large regional and national companies from those that are truly local, and it brings within its scope the chain-type businesses. To the extent that newspaper chains are like other types of chain businesses, then, the analysis under the FLSA should be the same. Otherwise, publishers would be treated more favorably under the FLSA than other businesses, and that would not be consistent with the purposes of the exemption. As this legislative history shows, the exemption was to make publishers equal to other businesses--not to make them better off.
Of course, application of the small newspaper exemption invites a somewhat different inquiry than the enterprise liability concept, and not just because its application is based on circulation levels, not dollar figures. We recognize that the enterprise concept is, at best, an analogy. Although the enterprise concept with the "mom and pop" exclusion and the small newspaper exemption may both be aimed at excluding small local businesses from the scope of the FLSA, the precise criteria for determining whether a business is local should be different depending on whether the business at issue is a small retailer or a small publisher.
We therefore emphasize at least one important difference between the enterprise inquiry in the FLSA generally and the small newspaper inquiry: fidelity to the statutory language of § 13(a)(8) requires that the common business purpose consideration be applied at a fairly specific level. More precisely, the court should make sure that the publications have a common publishing purpose--a purpose that includes both business operations and editorial operations of the publications. This approach will ensure application of the small newspaper exemption in a way that is consistent with the Wage and Hour opinion letters which have said that a single publisher may have more than a single newspaper and still come within the scope of the small newspaper exemption. Under this approach, newspapers run by a single publisher which are in effect just different regional editions would have their circulations aggregated to determine the application of § 13(a)(8), while those that are much more widely disparate would not.
Thus, in applying the small newspaper exemption to publishers of more than a single publication, the court should aggregate the circulation of those publications that are (1) related, (2) have a unified operation or control, and (3) have a common publishing purpose. In evaluating the first two factors, the focus should be on the different business operations of the publications. The court should look to see to what extent the publisher is taking advantage of significant economies of scale in running the publications. Particularly important would be the use of the same editorial staff and reporters for the different publications. Also important would be the degree to which the publications are after the same market niche in the different communities, the centralization of the publication decisions, the centralization of advertising sales, and other administrative functions of the publisher. The focus of the third consideration should be on the content of the papers--the extent to which the articles, advertisements, and editorials differ among the publications. Minor variations among the publications--different stories on only one page, for example--will not be enough require a court to measure their circulations separately.
3. Application of the Enterprise Concept
Under the approach we make applicable here, at least some of the Gateway newspapers' circulations should have been aggregated. First, the Gateway newspapers are certainly engaged in related activities. All of the papers in the Gateway chain supply their different communities with local suburban news otherwise not supplied by the major metropolitan newspapers. The focus of all the papers is on the local happenings in the different communities. Each of the papers is similar in much the same way individual stores in a retail chain are similar. See 29 C.F.R. §§ 779.206 and 207.
Second, the Gateway newspapers clearly satisfy the unified operation or common control requirement. Although the papers serve different communities, major decisions about administration and editorial policy are made from the central office in Monroeville: the publisher decides how many pages will be in each edition; all advertising is sold from the Monroeville office; Edith Hughes, the managing editor, oversees all editorial decisions for all nineteen papers; all employment-related decisions (hiring, firing, payroll) occur at the Monroeville office; and all printing is done at the Monroeville location. All other decisions seem to be made on a group-by-group basis: the newspapers in each group operate out of the same office and have the same editor; they have common operating budgets; and the papers within each group use the same reporters. In addition, Gateway uses the circulation numbers of the groups--not the individual papers--when selling its advertising space.
Third, the Gateway newspapers within each geographic group have a common publishing purpose. Although the papers within each of the five regional groups have some different local news items, they are otherwise identical. The first section has a few articles of local flavor, but other pages in the first section and the other two sections contain features, editorials and advertisements common to the other papers in the regional group. [App. at 22]. The papers within each group are just slight variations of each other. Indeed, they seem to be different editions of the same paper in much the same way major metropolitan daily papers have different regional editions. See, e.g., "New Beat for Urban Newspapers: Zoned Editions with a Hometown Feel," The Washington Post, Dec. 23, 1992, A3.
In sum, each geographic group of newspapers clearly constitutes one newspaper under the three part test adopted here; hence the circulation figures of the papers within each geographic group should have been aggregated. It is unclear whether, under the test we announce, all nineteen of the papers in the Gateway chain have a common publishing purpose and should have their circulations aggregated. However, we do not need to reach that question here. Because it is undisputed that the circulation within each group is above four thousand, none of the Gateway papers are small newspapers within the meaning of § 13(a)(8). Accordingly, the judgment of the district court must be reversed insofar as it found Gateway the beneficiary of the small newspaper exemption.
The "Professional Employee" Exemption
1. The Statutory Framework: the "Long" and "Short" Tests
The district court also held that the reporters were not exempt as professional employees under § 13(a)(1). We believe the district court was correct. Section 13(a)(1) of the FLSA provides that minimum wage and hours requirements of the FLSA do not apply to "any employee employed in a bona fide . . . professional capacity." 29 U.S.C. § 13(a)(1). The Department of Labor ("DOL") regulations outline three types of professionals: "learned," "artistic," and "teachers." If newspaper reporters are professionals at all, they must come within the scope of the definition for artistic professionals.*fn16
The DOL has issued regulations that provide a framework for applying the exemption for artistic professionals. These regulations outline both "long" and "short" tests for artistic professional status. See 29 C.F.R. § 541.3(a)-(e) ("long test"); 29 C.F.R. §§ 541.3(e) and 541.315 ("short test"). The long test applies to employees salaried below $250 per week. It has many requirements, set forth in § 541.3(a) through (e), the most important being 1) that the primary duty of the employee be "work that is original and creative in character in a recognized field of artistic endeavor" and 2) "the result of which depends primarily on the invention, imagination or talent of the employee." 29 C.F.R. § 541.3(a)(2). The short test applies to employees salaried at more than $250.*fn17 This is a simpler and more inclusive test which requires only that the employee's primary duty consist of "work requiring invention, imagination, or talent in a recognized field of artistic endeavor." 29 C.F.R. § 541.3(e). The short test does not require work that is "original and creative in character." While the tests are not all that different, it seems clear that any employee who is not a professional under the short test will not be one under the long test.
The district court did not distinguish between the Gateway reporters who made more than $250 per week and those who made less than $250 and, as a result, improperly applied the long test to five Gateway reporters who made more then $250 per week. We do not think that this mistake requires us to reverse the district court, however. Because we believe that none of the Gateway reporters would be considered professionals even under the short test, we affirm the district court's ruling on the Gateway reporters--both with respect to those that made more than $250 per week and those that made less.
2. Application of the Short Test to the Gateway Reporters
The short test requires us to determine: (a) the employee's "primary duty;" and (b) whether the performance of that duty requires either invention, imagination, or talent. This test, when applied in light of the DOL interpretations,*fn18 excludes the Gateway reporters from being professionals within § 13(a)(1).
a. Primary duty
The DOL interpretations of the professional employee exemption adopt the definition of primary duty found in the interpretations of a completely different exemption, the executive exemption, 29 C.F.R. § 541.103. Section 541.103 provides that, as a "general rule of thumb," primary duty means a duty at which an employee spends the major part, or over 50% of his or her time. Of course, time is not the sole factor to consider. Other factors include the importance of the duties when compared to other types of duties, the frequency with which the employee exercises discretionary powers, freedom from supervision, and pay relative to other employees. 29 C.F.R. § 541.103. See, e.g., Guthrie v. Lady Jane Collieries, Inc., 722 F.2d 1141, 1145 (3d Cir. 1983); Western Union, 621 F.2d at 1252.
The district court found, and the record shows, that the reporters spent over 50% of their time rewriting press releases, attending municipal, school board and city council meetings, interviewing people, answering phones, and typing wedding announcements, school lunch menus, business reviews, real estate transactions, and church news. [A 869-870, 929, 979-981, 1011-1012, 1063-1064]. The court found that most articles were either recast press releases issued under headings such as "what's happening," "church news," "school lunch menus," and "military news" or information taken from the police blotter, obituaries or real estate transaction reports. [A 20]. Based on these findings, the district court found that the Gateway reporter's job "was predominantly to fill pages by gathering facts about routine community events and reporting them in a standard format." [A 34]. That finding is not clearly erroneous.
b. Imagination, invention, or talent.
We do not believe that the Gateway reporters' primary duty required imagination, invention or talent as that term is used in the DOL regulations. As the DOL interpretations indicate, only a minority of reporters engage in work that depends on invention, imagination and talent: "The majority of reporters do work which depends primarily on intelligence, diligence, and accuracy. It is the minority whose work depends primarily on 'invention, imaging, or talent.'" 29 C.F.R. § 541.303(d).*fn19 We believe that the Gateway reporters are like the majority of reporters: although their fact gathering duties require intelligence, diligence and accuracy, such duties do not require invention, imagination or talent.
The bread and butter work of the Gateway reporters--even those making more than $250--is to collect information that is by and large already out in the community and just needs to be combined into a single source. The Gateway reporters follow up on press releases, attend meetings, interview local officials and record in their articles what they have found. This work does not require any special imagination or skill at making a complicated thing seem simple, or at developing an entirely fresh angle on a complicated topic. Nor does it require invention or even some unique talent in finding informants or sources that may give access to difficult-to-obtain information. In our view, the district court correctly understood that, although occasionally the reporters may have done creative work, their day-to-day duties were routine fact gathering, work that could be done with "general manual or intellectual ability and training." 29 C.F.R. § 541.3(a)(2). Based on these findings, which are not clearly erroneous, we hold that the Conclusion that the reporters covered under the "short test" are nonexempt follows as a matter of course.
By describing the Gateway reporters' duties as fact gathering, we do not mean that all gathering of facts is necessarily nonexempt work. The regulations and the interpretations are not so categorical. See Sherwood v. Washington Post Inc., 677 F. Supp. 9, 14 (D.D.C. 1988), rev'd on other grounds, 276 U.S. App. D.C. 404, 871 F.2d 1144 (D.C. Cir. 1989). But we believe that the type of fact gathering done by the Gateway reporters is not the type of fact gathering that demands the skill or expertise of an investigative journalist for the Philadelphia Inquirer or Washington Post, or a bureau chief for the New York Times. Cf. id.
In sum, while the reporters for Gateway certainly work in a medium in which creativity is possible, it does not mean that their work is artistic within the meaning of § 541.3. After all, if we were to find that the Gateway reporters are in the minority of reporters whose primary duty requires imagination and talent, it is hard to see what reporters would be left in the majority. We are therefore satisfied that the district court properly held that the Gateway reporters were not professionals within the meaning of § 13(a)(1).*fn20
IV. BACK WAGES TO NON-TESTIFYING EMPLOYEES
Because the district court found that at trial some of the Gateway papers were exempt under the small newspaper exemption, and some were not, it was important for it to determine which reporters worked for which papers. Unfortunately for the Secretary, the evidence that was introduced to prove the amount of back wages owed to the reporters did not indicate for which papers the non-testifying reporters worked. Since the court had no way of knowing which of the non-testifying reporters had worked for the non-exempt papers, it could not determine which non-testifying reporters were covered by the exemption and which were not. As a result, it awarded back wages only to those reporters who had testified at trial.
Since we have decided that all of the Gateway newspapers are outside the scope of the small newspaper exemption, it is less crucial to know which reporters worked for which newspaper in order to determine what back pay should be awarded. However, it is important to know what amount of back pay is due. Unfortunately, the record in this case is meager, and the Secretary produced evidence of patterns of conduct at the different geographical groups in only an oblique way.
The Secretary did present the testimony of 22 out of 70 employees for whom back wages were sought. All of these employees gave virtually identical testimony about the pattern and practice of hours worked at Gateway. The Secretary also provided the wage calculations of the actual hours worked by a number of employees, and the back wages owed. At least one employee from each geographical group testified about the patterns and practices of hours worked [A 371, 410 (East), 390 (West), 526, 558 (Carnegie), 40 (South), 490 (North)]. But it is not clear whether all of these employees were reporters. In addition, of the 22 testifying employees, less than half indicated the papers to which they were assigned. It is also difficult to glean from the record how much extra time these reporters spent at work in order to estimate the back wages due.
The Secretary's burden in these cases, however, is merely to present a prima facie case. Indeed, it is settled that the burden (with respect to a given employee) is met if it is proved that the employee has in fact performed work for which he was improperly compensated and if the employee produces sufficient evidence to show the amount and extent of that work as a matter of just and reasonable inference. Anderson v. Mt. Clemens Pottery Co., 328 U.S. 680, 687-88, 66 S. Ct. 1187, 90 L. Ed. 1515 (1946); Selker Bros., 949 F.2d at 1297-98. If the employer fails to produce adequate records about the employee's wages and hours, the court may then award damages to the employee even though the result may only be approximate. Selker Bros., 949 F.2d at 1297-98.
In addition, the Secretary did not have to bring every employee seeking back wages to court to testify. Courts commonly allow representative employees to prove violations with respect to all employees. Anderson v. Mount Clemens Pottery Co., 328 U.S. 680, 66 S. Ct. 1187, 90 L. Ed. 1515 (1946) (8 out of 300 employees testified); McLaughlin v. Ho Fat Seto, 850 F.2d 586 (9th Cir. 1988) (5 out of 28), cert denied, 488 U.S. 1040, 109 S. Ct. 864, 102 L. Ed. 2d 988 (1989); Donovan v. Williams Oil Co., 717 F.2d 503 (10th Cir. 1983); Donovan v. Simmons Petroleum Corp., 725 F.2d 83, 86 (10th Cir. 1983) (testimony of twelve employees sufficient to support an award for all former employees); Donovan v. New Floridian Hotel, Inc., 676 F.2d 468 (11th Cir. 1982) (23 out of 207 receiving an award; award denied to 56 non-testifying employees); Brennan v. General Motors Acceptance Corp., 482 F.2d 825 (5th Cir. 1973) (16 out of 26); McLaughlin v. DialAmerica Marketing, Inc., 716 F. Supp. 812 (D.N.J. 1989) (43 out of 393); Marshall v. Brunner, 500 F. Supp. 116 (W.D. Pa. 1980) (48 out of 93), aff'd in part, rev'd in part, 668 F.2d 748 (3d Cir. 1982). Cf. Secretary of Labor v. A. Michael DeSisto, et. al., 929 F.2d 789, 792 (1st Cir. 1991). Thus, not all employees need to testify in order to prove the violations or to recoup back wages. Selker, 949 F.2d at 1298. Rather, the Secretary can rely on testimony and evidence from representative employees to meet the initial burden of proof requirement. Id. "Once the pattern is established, the burden shifts to the employer to rebut the existence of the violations  or to prove that individual employees are excepted from the pattern or practice." Id.
The Secretary appears to have met this burden, but that is not entirely clear, and we prefer to leave that determination to the district court on remand, guided by this Discussion. So we will remand to the district court to reconsider the matter. On remand, the district court should carefully scrutinize the evidence before denying or allowing back pay to the non-testifying reporters. See, e.g., Donovan v. New Floridian Hotel, Inc., 676 F.2d 468, 471-73 (11th Cir. 1982) (the district Judge "carefully scrutinized" the evidence upon which the awards of back pay were based, allowed back wages to 151 employees and denied back wages to 56). Although the court may rely only on the trial record, it may also supplement the record and have the Secretary present evidence of the patterns of conduct at each of the geographical groups. Representative reporters from each group could testify about both hours worked and hours paid. The court might also invite evidence from editors or other supervisors in each geographical group indicating hours worked and hours paid. Of course, Gateway should be given the opportunity to present evidence from payroll records that would tend to negate the inferences to be drawn from the testimony of the representative reporters.
The Secretary also argues that Gateway's violations of the FLSA were willful and that the applicable limitations period should therefore be three years (instead of only two) under 29 U.S.C. § 255(a). Under the governing standard, Gateway did not commit a willful violation of the FLSA unless it "knew or showed reckless disregard for the matter of whether its conduct was prohibited by the [FLSA]." McLaughlin v. Richland Shoe, Co., 486 U.S. 128, 108 S. Ct. 1677, 100 L. Ed. 2d 115 (1988). The district court concluded that the case "presented legitimate questions of law and fact to the court" and that "Gateway reasonably believed that it was entitled to the benefits of the exemptions under 29 U.S.C. §§ 213(a)(1) and (a)(8)." [A 35]. We agree.
The Secretary did present evidence supporting his position. Several employees testified that Hughes, the managing editor, told them not to record more than forty hours on their time slips. And employees who did record more than forty hours were reprimanded and instructed to revise their time slips so that they reflected only forty hours worked. [A 316-320]. In one case an editor threatened to fire a reporter if he did not do so. [A 316-320]. Also, despite the fact that Gateway claims that it thought it was exempt, the evidence indicated that Gateway did in fact pay overtime to some employees.*fn21
On the other hand, the district court found that in many of these cases employees themselves, and without prompting, filled out their time slips inaccurately, so that the additional hours worked were not solely due to Gateway's directives. It would be unfair to use evidence that mainly indicates that the Gateway reporters were committed to their jobs as proof of Gateway's willful violation of the FLSA. More importantly, the district court correctly observed that this case presents not only close questions of law and fact, but also a case of first impression with respect to one of the governing exemptions notwithstanding that it has been on the books for 55 years. Gateway did not in any way thwart settled FLSA doctrine. See Hilbert v. District of Columbia, 784 F. Supp. 922, 925 (D.D.C. 1992) ("Although [the defendant] ultimately acted on the basis of an erroneous legal interpretation, it did not thwart settled law or recklessly disregard pertinent legal questions."). The district court concluded that under all the circumstances, Gateway's actions were not willful. We are not inclined to disturb this Conclusion.
For the foregoing reasons, we hold that none of the Gateway newspapers are exempt under the small newspaper exemption of § 13(a)(8); that none of the Gateway reporters are professional employees within the meaning of § 13(a)(1); that the case must be remanded for determination of back wages for non-testifying employees; and that Gateway's actions were not willful. We will therefore affirm in part, reverse in part, and remand for further proceedings consistent with this opinion.
ALITO, Circuit Judge, Dissenting in part.
I must disagree with the court's interpretation of the "small newspaper" exemption contained in the Fair Labor Standards Act (FLSA), 29 U.S.C. § 213(a)(8). This provision exempts "any employee employed in connection with the publication of any weekly, semiweekly, or daily newspaper with a circulation of less than four thousand the major part of which circulation is within the county where published or counties contiguous thereto" (emphasis added). The court interprets this language to apply only if the "enterprise" of which the newspaper is a part has a circulation of less than 4,000. The court cites no legislative history directly supporting this interpretation, and the court forswears reliance on the sparse administrative interpretations that are available. Under these circumstances, I cannot accept the court's interpretation.
Looking solely at the statutory language, I do not think the term "newspaper" should be interpreted to mean "enterprise." When the FLSA was enacted, Congress surely recognized that a small "newspaper" could be part of a larger enterprise; newspaper chains were not unknown. Accordingly, if Congress had meant to refer to an "enterprise," it would, I presume, have used that or some comparable term. I would, therefore, interpret the term "newspaper" to mean what it says: an entity that is, in reality and not just in name, a separate newspaper.
This is the definition propounded in a 1946 Wage and Hour Division opinion letter, which stated that a publisher may treat newspapers separately in determining whether their circulations exceed 4,000 unless "the purported separate publications are properly to be regarded as one and the same newspaper." 1948 Wage & Hour Manual (BNA) at 328. Similarly, a 1965 Wage and Hour Division opinion letter stated that "when a company publishes more than one newspaper, each newspaper is tested separately in order to determine whether the circulation is less than four thousand, provided that, in addition to their separate mastheads, the several newspapers carry different local news items." Op. Letter No. 376, [1961-1966 Transfer Binder] Lab. L. Rep. (CCH) P 30,988. As the court notes, a 1969 Wage and Hour opinion letter does not seem entirely consistent with these earlier opinion letters. See Op. Letter No. 973, [1967-1972 Transfer Binder] Lab. L. Rep. (CCH) P 30,511. This letter, however, expressly stated that "an unequivocal opinion" could not be given because "sufficient information" had not been provided.*fn22 For this reason, I would not give this opinion letter much weight. But even if this opinion letter deprives the prior opinion letters of any entitlement to deference that they would otherwise enjoy, I still think that their interpretation of the statutory language is more accurate than the court's.
The district court in this case applied the interpretation set out in the 1965 opinion letter. Accordingly, I believe that the district court employed the correct legal standard. I am also not convinced that the district court misapplied this standard to the facts of this case. I would therefore affirm the order of the district court.