Lead Opinion
In mеeting the requirements of the minimum wage prescribed by the Fair Labor Standards Act, the appellant restaurant and motel chain claims credit for meals furnished to its employees. Since the employees must take the meals, and are given no option to take cash, the Secretary of Labor disallowеd the credit. The district court by declaratory judgment upheld the Secretary. We reverse on the ground that the Secretary has read into the statute a voluntary-choice-by-employee provision that Congress did not require.
The Fair Labor Standards Act (FLSA) guarantees employees covered by the statute a minimum wage. 29 U.S.C.A. § 206. Section 3(m) allows an employer a credit for “the reasonable cost ... to the employer of furnishing [an] employee with board ... if such board . .. [is] customarily furnished by such employer to his employees.” 29 U.S.C.A. § 203(m). This appeal presents a legal question: does this credit apply only if workers are continuаlly given the option to take cash rather than the meal provided. The parties have stipulated to the facts. Appellant Davis Brothers operates restaurants, featuring primarily smorgasboard and cafeteria-style service, as well as motels. Up until a few years ago, Davis Brothers paid most hourly employees at least the full minimum wage in cash without deducting for food provided by the restaurants. Employees had the option to purchase meals from their employer at less than the retail price. In January 1980, however, Davis Brothers began requiring all non-managerial employees to take part of their compensation in the form of meals. Only workers who for medical reasons could not eat the food offered were paid the full minimum wage in cash. For all other hour
In March 1980, the Department of Labor informed Davis Brothers that it was not entitled to credit because the meal plan was mandatory. Although the Department did not specify how frequently employees have to be afforded the choice of taking cash in lieu оf meals, it indicated that an employee’s acceptance of meals is not really voluntary if it is a prerequisite to employment. In reaching this position, the Department relied on 29 C.F.R. § 531.30 (1981), an interpretative rule promulgated by the agency in 1940. This rule, which construes the word “furnished” as used in the credit provision of thе FLSA, 29 U.S.C.A. § 203(m), provides in pertinent part: “[n]ot only must the employee receive the benefits of the facility for which he is charged, but it is essential that his acceptance of the facility be voluntary and uncoerced.”
The legality of the Secretary’s choice requirement is a question of first impression for this Court. In addition to the district court whose judgment is reviewed here, two other district courts have upheld the Secretary’s position: Morrison, Inc. v. Donovan, argued on appeal with this case and this day decided at
Section 3(m) of the statute provides that wages include the reasonable cost of meals “customarily furnished” to employees. Through its interpretative regulation, the Secretary of Labor has in effect construed “customarily furnished” by the employer to mean “voluntarily acceptеd” by the employees. We fail to discern any basis for this construction. Congress is presumed to use words in their ordinary sense unless it expressly indicates the contrary. Addison v. Holly Hill Fruit Products,
Perhaps aware that the literal language оf section 3(m) does not support his position, the Secretary relies on the legislative purpose behind the FLSA. Congress decided to guarantee workers a minimum wage to prevent exploitation through the superior bargaining position often held by employers. See Brooklyn Savings Bank v. O’Neil,
In a second argument based on legislative intent, the Secretary notes that Congress wanted the individual employee to enjoy “the freedom ... to allocate his minimum wage among competing economic and personal interests.” Brennan v. Heard,
The Secretary notes that a few courts have relied on the voluntary and uncoerced standard promulgated in 29 C.F.R. § 531.30 (1981) in denying employers credit for facilities they prоvided their workers. See Marshall v. Intraworld Commodities Corp., 24 Wage & Hour Cas. (BNA) 860, 864 (E.D.N. Y.1980); Hodgson v. Frisch Dixie, Inc., 20 Wage & Hour Cas. (BNA) 167, 171 (W.D. Ky.1971), aff’d,
The record does not reveal any comparable incidents of employee exploitation by Dаvis Brothers. Workers have been informed of the meal credit plan from the very beginning. The Secretary has not established or even argued that the company has deducted more than the actual cost of the food, has provided unpalatable or non-nutritious meals, or has in any other way denied its employees the full value of their minimum wage. The credit is not for the retail value of the meals, but is limited to the reasonable cost to the employer of providing the meals. 29 U.S.C.A. § 203(m).
A number of courts have awarded credit for facilities provided even though the em
The parties have proffered a number of policy arguments. The Secretary notes that employees who elect for one reason or another not to eat the meal are disadvantaged by the mandatory meal credit plan. He brings up the unappetizing spectre of a limited menu, fast food operator requiring his employees to consume the same fare day in and day out. Amicus The National Restaurant Association, on the other hand, argues that a voluntary plan will increase administrative and accounting costs. Amicus also stresses that the value of meals, which is not taxable to employees if provided for the employer’s convenience, I.R.C. § 119(b)(3)(A) (1981), will become taxable if workers are given the choice to take cash instead. I.R.C. § 119(b)(3)(B)(ii); Treas.Reg. § 119-l(a)(3)(i) (1981). While both sides raise interesting pоints, the arguments are directed to the wrong forum. Donovan v. Miller Properties, Inc.,
REVERSED.
Dissenting Opinion
dissenting:
I agree with the majority’s reading of 29 U.S.C.A. § 203(m), insofar as the majority has concluded that “customarily furnished” by the employer does not mean “voluntarily accepted” by the employee. However, the mаjority took its own interpretative step— perhaps smaller than the one it has rejected — when it concluded that Davis Brothers, which until 1980 paid full minimum wage and allowed employees the choice of buying discounted meals, now “customarily furnishes” those meals, automatically taking 25 or 35 cents from the minimum wage formerly paid cash in full.
Calling for attention are the last words of the sentence from Section 203(m) quoted by the majority in the opinion’s second paragraph. Those words state simply that a wage includes board, “... if such board ... [is] customarily furnished by such employer to his employees." (emphasis added). These words convey the ordinary sense that the custom of furnishing board must be specific to the restaurant, cafeteria or food service in question if such board is to be included in the wage. They serve no purpose otherwise. Davis Brothers, having initiated its plan so recently as 1980, had no custom of providing board in exchange for a reduction in cash wages.
In Tennessee Coal, Iron and Railroad Co. v. Muscoda Local No. 123,
That court [the district court], in making its findings, properly directed its attention solely to the evidence concerning petitioners’ iron ore mines and disregarded the customs and contracts in the coal mining industry.
The Secretary, in his defense of a regulation which the majority correctly determined sweeps too broadly, neglected to address the simple meaning of the quoted sentence of the statute. The majority approvingly cites two district court оpinions construing “customarily furnished.” Donovan v. Miller Properties, Inc.,
The legislative history of the Fair Labor Standards Act is inconclusive insofar as whether the custom of the individual employer or the custom of the industry is to be the object of examination. The Senate Report accompanying the Fair Labor Standards Amendments of 1966, by which restaurant employees were brought within the minimum wage coverage, does state:
It should be noted that at present “wages” include the reasonable cost of board, lodging, аnd other facilities customarily provided by the employer to his employees. Employee meals are never considered primarily for the benefit or convenience of the employer and thus meals provided to restaurant employees by their employers will be considered part of wages under the provisions of the present law.
S.Rep. No. 1487, 89th Cong., 2nd Sess., reprinted in 2 1966 U.S.Code Cong. & Adm. News 3002, 3015. However, the paralleling House Report does not contain the crucial second sentence of the above paragraph, although it repeats verbatim the first sentence. H.R.Rep. No. 1366, 89th Cong., 2nd Sess. 19. Nor does the conference report address the matter. Conference Rep. No. 2004, 89th Cong., 2nd Sess., reprinted in 2 1966 U.S.Code Cong. & Ad.News 3047.
Thus, in view of the plain language of the statute and the rule of the Supreme Court for examining custom, Davis Brothers, which only recently brought its plan into being, did not customarily furnish board to its employees.
Notes
. The case provides further help in this matter of custom:
The futile effоrts by the miners to secure at least partial compensation for their travel time and their dissatisfaction with existing arrangements, moreover, negative the conclusion that there was any real custom as to
the workweek and compensation therefor. A valid custom cannot be based on so turbulent and discordant a history; it requires more than unilateral and arbitrary imposition of working conditions.