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Reich v. Gateway Press

filed: January 6, 1994; As Corrected January 31, 1994. As Corrected April 11, 1994. As Corrected February 3, 1994.


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.

Author: Becker


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.



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

East 24,628

South 5,905

West 23,980

Including Cranberry Review Journal 11,775 (Subject to CAC audit)

Carnegie 6,609

Total Market 61,122

[A 115].

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 ...

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