Before DUFFY, Chief Judge, MAJOR and SWAIM, Circuit Judges.
SWAIM, C.J.: This action was brought by the Secretary of Labor to enjoin the defendant, Pascal System, Inc., from continuing its alleged violations of overtime and record-keeping provisions of the Fair Labor Standards Act (29 U.S.C.A. Sec. 201 et seq. ). The District Court concluded:
"The defendant, in the business of renting automobiles and trucks, does not come within the scope of the Fair Labor Standards Act of 1938, as amended."
On appeal the Government argues only that the defendant, Pascal System, does come within the scope of the Act.
The appeal presents but two questions, both having to do with the application of the Fair Labor Standards Act: (1) are the defendant's employees engaged in interstate commerce or the production of goods for commerce; and (2) does the defendant's business meet the requirements for exemption provided by Section 13(a) of the Act (29 U.S.C.A. Sec. 213(a))?
Section 7 of the Fair Labor Standards Act, under which this suit is brought, states that "* * * no employer shall employ any of his employees who is engaged in commerce or in the production of goods for commerce for a work-week longer than forty hours, unless such employee receives compensation for his employment in excess of the hours above specified at a rate not less than one and one-half times the regular rate at which he is employed." 29 U.S.C.A. Sec. 207(a). Thus, the Act applies to the defendant only if its employees are engaged in commerce or the production of goods for commerce.
The Act defines "commerce" as meaning: "* * * trade, commerce, transportation, transmission, or communication among the several States or between any State and any place outside thereof." 29 U.S.C.A. Sec. 203(b).
The Act defines "produced" as "* * * manufactured, mined, handled, or in any other manner worked on in any State; and for the purposes of this chapter an employee shall be deemed to have been engaged in the production of goods if such employee was employed in producing, manufacturing, mining, handling, transporting, or in any other manner worked on such goods, or in any closely related process or occupation directly essential to the production thereof, in any State." 29 U.S.C.A. Sec. 203(j).
The District Judge found that the defendant is engaged in renting trucks and automobiles to both individuals and business firms, and that all of its employees are engaged in those activities. It was further found that the defendant, whose place of business is in Chicago, buys more cars than it needs in its own business in order to take advantage of lower fleet-lot rates. The extra cars are then sent to other similar rental agencies outside of Illinois. These cars are delivered to defendant by employees of the companies from which they are purchased and are driven on to the out-of-state rental agencies by the employees of those agencies. But the defendant admits that its employees perform certain services upon these cars, such as the necessary paper work, mechanical check ups and filling with gas and oil, to prepare them for their journeys.
Under the provisions of the Fair Labor Standards Act, the defendant's employees are engaged in commerce or the production of goods for commerce on the strength of either one of two different aspects of their employment. They perform necessary functions in maintaining and renting cars and trucks some of which furnish interstate "transportation" for the individuals and firms who rent them and, in the case of cars "forwarded" to other rental companies, for the firms that have purchased them. The defendant's employees also perform necessary services on cars that are leased to industrial firms which use them in the production of goods for commerce.
Employees who neither personally produce goods nor transport them are nevertheless engaged in the production of goods for commerce, within the meaning of the Act, if they perform a function that is necessary to the production of goods for commerce. Union National Bank of Little Rock, Arkansas v. Durkin, 8 Cir., 207 F.2d 848; Grant v. Bergdorf & Goodman Co., 2 Cir., 172 F.2d 109. In these cases maintenance workers and elevator operators in buildings where goods for commerce were produced were held to be engaged in the production of goods for commerce within the meaning of the Fair Labor Standards Act although some of the employees involved were not even employees of the firms that produced the goods.
It has been held that employees of a "drive-it-yourself" car and truck rental company were engaged in the production of goods for commerce within the meaning of the Fair Labor Standards Act. Hertz Drivurself Stations v. United States, 8 Cir., 150 F.2d 923. The court there said:
"* * * any employee of an owner of automobile trucks or passenger cars, which are leased to others for interstate use whose work has 'a close and immediate tie' (Kirschbaum Co. v. Walling, 316 U.S. 517, 525) with the process of keeping such vehicles generally in condition or in readiness for such use, is engaged in the production of goods for commerce within the meaning of the Fair Labor Standards Act." 150 F.2d at page 926.
With regard to defendant's practice of purchasing extra cars in order to obtain fleet prices and keeping them a short time until they are "forwarded" to other car rental concerns outside of Illinois, it has been held that wholesalers who handle goods solely within one state but while they are in the process of being shipped between states are engaged in interstate commerce. Walling v. Jacksonville Paper Co., 317 U.S. 564. By processing and servicing cars for forwarding to firms outside of Illinois the defendant's employees are actually handling cars that are in ...