ELAINE L. CHAO, Secretary of Labor v. Double Jj Resort Ranch

*The Honorable R ichard M ills, United States District Judge for the
Central District of Illinois, sitting by designation.
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RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206
ELECTRONIC CITATION: 2004 FED App. 0220P (6th Cir.)
File Name: 04a0220p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
_________________
ELAINE L. CHAO, Secretary of
Labor,
Plaintiff-Appellant,
v.
DOUBLE JJ RESORT RANCH, et
al.,
Defendants-Appellees.
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No. 02-2068
Appeal from the United States District Court
for the Western District of Michigan at Grand Rapids.
No. 01-00141—Robert Holmes Bell, Chief District Judge.
Argued: March 10, 2004
Decided and Filed: July 9, 2004
Before: MARTIN and CLAY, Circuit Judges; MILLS,
District Judge.*
2 Chao v. Double JJ Resort Ranch, et al. No. 02-2068
_________________
COUNSEL
ARGUED: Mary J. Rieser, UNITED STATES
DEPARTMENT OF LABOR, Washington, D.C., for
Appellant. Donald A. Van Suilichem, VAN SUILICHEM &
ASSOCIATES, Bloomfield Hills, Michigan, for Appellees.
ON BRIEF: Mary J. Rieser, Paul Frieden, UNITED
STATES DEPARTMENT OF LABOR, Washington, D.C.,
for Appellant. Donald A. Van Suilichem, VAN SUILICHEM
& ASSOCIATES, Bloomfield Hills, Michigan, for Appellees.
_________________
OPINION
_________________
BOYCE F. MARTIN, JR., Circuit Judge. Secretary of
Labor, Elaine Chao, asks us to overturn the district court's
grant of summary judgment to Double JJ Resort Ranch, Inc.,
et al. She also asks us to reverse the district court's denial of
her motion for summary judgment. She argues that the
district court erred when it found Double JJ to be exempt
from the minimum-wage and overtime-pay guarantees of the
Fair Labor Standards Act, 29 U.S.C. §§ 206(a), 207(a). We
agree in part and REVERSE.
I.
Defendants are a group of corporations doing business as
Double JJ Resort. Double JJ is a large western-themed resort
near Rothbury, Michigan. The resort includes a variety of
lodging and dining facilities, a conference center (for up to
250 people), bars, a general store, a gift shop, a gas station, a
barbershop, campsites, swimming pools, three lakes, and
facilities related to horseback riding. While at Double JJ,
resort guests can go canoeing, attend camp fires, shoot
archery, play shuffleboard, climb walls (for fun and in

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No. 02-2068 Chao v. Double JJ Resort Ranch, et al. 3
designated areas), fish, go on hay rides, pet farm animals, or
ride water slides, among other things. There is also a golf
course on site, but both parties agree that it is a separate
establishment and is not part of this suit. Guests may
purchase a "package deal," or they may purchase their food,
lodging, and recreational activities separately. The great bulk
of Double JJ's revenue comes from the sale of food, drink,
and lodging, not from the sale of recreational activities.
Double JJ employs from 300 to 350 employees during the
peak season and about 50 employees in the off-season.
Double JJ earns the bulk of its revenue during the peak
season, serving up to 300 overnight guests each night and an
additional 100 daytime visitors. Double JJ pays both hourly
wages and salaries, depending on the employee, but no
employee is paid overtime, and some employees are paid less
than the minimum wage.
Secretary Chao brought this enforcement action under
section 17 of the Fair Labor Standards Act of 1938, 29 U.S.
C. § 201 et seq., in the United States District Court for the
Western District of Michigan. She sought to enjoin Double
JJ from violating the minimum-wage, overtime, and record-
keeping requirements of the Act.
The Secretary alleged that the since April 4, 1998, and in
violation of 29 U.S.C. § 215, Double JJ: failed to pay covered
employees at least minimum wage as required by 29 U.S.C.
§ 206(a); failed to pay covered employees at a rate not less
than one and one-half times their regular rate of pay for all
hours worked in a workweek in excess of the first forty, as
required by 29 U.S.C. § 207(a)(1); and failed to keep records
of employee wages, hours, and conditions of employment as
required by 29 U.S.C. § 211(c). Double JJ responded,
claiming that it had not violated the Act, because it was
exempt from the requirements as an "amusement or
recreational facility."
4 Chao v. Double JJ Resort Ranch, et al. No. 02-2068
Section 13(a)(3) of the Act provides that the minimum-
wage requirements, 29 U.S.C. § 206, and the overtime-pay
requirements, 29 U.S.C. § 207, are not applicable with respect
to:
any employee employed by an establishment which is an
amusement or recreational establishment, organized
camp, or religious or non-profit educational center, if (A)
it does not operate for more than seven months in any
calendar year, or (B) during the preceding calendar year,
its average receipts for any six months of such year were
not more than 33 1/3 per centum of its average receipts
for the other six months of such year, except that the
exemption from sections 206 and 207 of this title
provided by this paragraph does not apply with any
respect to any employee of a private entity engaged in
providing services or facilities (other than, in the case of
the exemption from section 206 of this title, a private
entity engaged in providing services and facilities
directly related to skiing) in a national park or a national
forest, or on land in the National Wildlife Refuge
System, under a contract with the Secretary of the
Interior or the Secretary of the Agriculture[.]
Both parties filed for partial summary judgment. The
district court granted the defendants' motion and dismissed
the case. The court explained:
[w]hile a majority of the Double JJ's revenue is from
food and lodging, only a few guests visit the Double JJ
either for food or lodging. Guests' principal reason for
visiting the Double JJ is to participate in recreational
activities, and food and lodging are secondary to the
principle purpose of enjoying recreational activities.
Hence, the Court finds that on the specific facts of this
case, Defendant's principal activity is recreational.
Secretary Chao filed this appeal.

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No. 02-2068 Chao v. Double JJ Resort Ranch, et al. 5
II.
"Whether employees are within an exemption from the
provisions of the [Fair Labor Standards] Act is primarily a
question of fact. The District Court's finding of fact cannot be
set aside unless they are clearly erroneous." Brennan v.
Southern Prods., Inc., 513 F.2d 740, 744 (6th Cir. 1975).
However, where, as here, the facts are not in dispute, but the
parties contest the legal application of those facts, we review
the district court's grant of summary judgment de novo. Paul
Revere Life Ins. Co. v. Brock, 28 F.3d 551, 553 (6th Cir.
1994); see also United States v. Brown, 915 F.2d 219, 223
(6th Cir. 1990) (holding a district court's statutory
interpretations will be reviewed de novo).
It is well settled law in our Circuit that an employer who
claims to be exempt from the requirements of the Fair Labor
Standards Act has the burden of proving it qualifies under the
terms of a specific exemption. Homemakers Home & Health
Care Servs., Inc. v. Carden, 538 F.2d 98, 101 (6th Cir. 1976).
"[The Act] was designed to eliminate labor conditions
detrimental to the maintenance of the minimum standard of
living necessary for the health, efficiency, and general well-
being of workers." Brock v. Louvers and Dampers, Inc., 817
F.2d 1255, 1256 (6th Cir. 1987). "[W]ithin the terms of the
coverage fashioned by Congress, the Act has been construed
liberally to apply to the furthest reaches consistent with
congressional discretion." Mitchell v. Lublin, McGaughy &
Assocs., 358 U.S. 207, 211 (1959). Thus, "exemptions from
the Act are to be narrowly construed against the party
asserting them and their application limited to those
establishments plainly and unmistakably within their terms
and spirit." Homemakers, 538 F.2d at 101 (internal citations
omitted).
III.
Secretary Chao makes one argument on appeal. Conceding
that Double JJ meets the "seasonal" requirement of the section
6 Chao v. Double JJ Resort Ranch, et al. No. 02-2068
213(a)(3) test, the Secretary argues that the district court erred
in its determination that Double JJ was the type of
establishment that Congress intended to exempt. We agree.
This case centers on the legal definition of the phrase
"amusement and recreational establishment" as it is used in 29
U.S.C. § 213(a)(3). "When interpreting a statute, this Court
must begin with its plain language, and may resort to a review
of congressional intent or legislative history only when the
language of the statute is not clear." Herman v. Fabri-
Centers of Am., Inc., 308 F.3d 580, 585 (6th Cir. 2002).
Double JJ argues that we need go no further than the
statute's plain language to affirm the district court. In
essence, Double JJ claims that there is a common sense
definition of "recreational establishment" – which apparently
is being in the "fun business" – and that it clearly qualifies.
While we applaud Double JJ’s appeal to common sense, its
argument followed to its logical end would allow the
exemption to become the rule. See e.g., Dole v. Mr. W.
Fireworks, Inc., 889 F.2d 543, 546 (5th Cir. 1989)
("permitting every seaside merchant to claim the exemption
would result in the exemption swallowing the rule").
Arguably, any ice-cream stand or restaurant could qualify
under Double JJ's proposed interpretation. A boat seller could
claim that it was derivatively a "recreational establishment,"
given that its sales enable the fun of sailing. It would
certainly not be a laughable claim under Double JJ's
definition that the boat seller is in the "recreation business."
Most businesses sell something -- a thing, a service, a right to
occupy -- and any number of arguments could be marshaled
to connect the remote sale to something fun. Thus, unlike
Double JJ, we do not believe we can end our analysis with a
plain-language interpretation of section 213(a). "Recreational
establishment" is an ambiguous phrase. Congress clearly
meant for there to be a limitation to the exemption, and the
words used in the statute do not plainly convey where that
boundary lies.

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No. 02-2068 Chao v. Double JJ Resort Ranch, et al. 7
The Secretary turns our attention to both the legislative
history of the Act and the opinions of the Labor Department's
Wage and Hour Administrator to support her argument that
Double JJ is not exempt. "Because [the Department of
Labor's] Wage and Hour Administrator is the primary federal
authority entrusted with determining the [Act's] scope, these
interpretations while not controlling upon the courts by reason
of their authority, do constitute a body of experience and
informed judgment to which the courts and litigants may
properly resort to for guidance." Reich v. Miss Paula's Day
Care Ctr., Inc., 37 F.3d 1191, 1194 (6th Cir. 1191) (citations
omitted). We treat legislative histories similarly. See, e.g.,
Montgomery v. Huntington Bank, 346 F.3d 693, 699 (6th Cir.
2003).
The amusement and recreational establishment exemption
was originally enacted in 1961. The Senate Committee
Report describing the enactment of the exemption reads:
(c) Amusement and recreational establishments operating
on a seasonal basis. – A similar exemption without
regard to the annual sales volume of the enterprise, is
provided for employees of amusement and recreational
establishments operating on a seasonal basis. These
establishments are typically those operated by
concessionaires at amusement parks and beaches for 6
months or less than a year.
S. Rep. No. 145, 87th Cong., 1st Sess., reprinted in 1961 U.S.
Code Cong. & Admin. News at 1620, 1647-48; see also
Louvers, 817 F.2d at 1257.
Reasoning by analogy, we are comfortable with the idea
that Double JJ is not the type of establishment that Congress
intended to exempt. Selling treats at Disneyland is a far cry
from renting hotel rooms at the Disney Hotel. Riding a roller-
coaster ride is different than buying dinner and renting a
room. One is recreational and the other is a necessity of life.
8 Chao v. Double JJ Resort Ranch, et al. No. 02-2068
We need not stop with the congressional report, however.
Our conclusion finds support in a 1979 opinion letter from the
Wage and Hour Administrator, which makes clear that:
hotels, motels and eating places do not have an
amusement or recreational character. Nor do . . . gas
stations. . . . The fact that these stores are heavily
patronized by tourists does not make them recreational or
amusement establishments any more than restaurants,
retail stores, and similar establishments at a seaside resort
would be considered exempt.
1979 WL 62129. Further, a 1994 Wage and Hour
Administrator opinion, dealing with a dude ranch, explains:
[w]hile it appears that your client's operations meet the
criteria in section 13(a)(3)(B), it is our opinion that your
client's dude ranch is not an "amusement or recreational
establishment" within the section of 13(a)(B) of the [Fair
Labor Standards Act]. It is our opinion that the ranch
falls within the category of a resort hotel.
1994 WL 1004822. Combing this persuasive authority, we
do not believe that Congress intended to exempt
establishments like Double JJ.
To clarify, unlike the district court below, we do not think
that Double JJ's principal activity is selling recreational
activities. Instead, Double JJ is a "resort hotel." It offers
recreational activities not because selling recreational
activities is its primary end, but as a way to get to people to
come to a rather remote spot in Michigan to buy food, to rent
beds, and to have meetings. The Secretary asks that we adopt
an "income test" to guide our analysis, but we do not think it
necessary to do so in this case. The legislative history, the
Wage and Hour Administrator's opinions, and common sense
compel our finding that Double JJ is not in the recreation

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No. 02-2068 Chao v. Double JJ Resort Ranch, et al. 9
1W ere Double JJ situated in a National Park or National Forest our
analysis would be different. See 29 U.S.C. § 21 3(a)(3); see also Chessin
v. Keystone Resort Mgmt, Inc., 184 F.3d 11 88 (10th Cir. 1999).
business.1 Its primary purpose is to sell foods and rent beds;
the recreational activities are just a carrot enticing people to
make the trip.
IV.
Our analysis thus far has considered Double JJ to be one
establishment. As we noted above, Double JJ does not
contest that it has failed to pay its employees the prevailing
minimum wage and required overtime pay. Nor does Double
JJ contest that it has failed to keep adequate records as
required by the Act. Instead, it argues that it was exempt
from the Act's requirements. Having rejected the idea that
Double JJ is wholly exempt from the Act's provisions, we are
nonetheless uncomfortable remanding with instructions to
enter judgment for Secretary Chao. While we are certain that
parts of Double JJ are bound by the Act's pay and records
requirements (for example, the bars, restaurants, dining
facilities, conference center, lodging facilities, and gas
station), we cannot, on this record, declare that Double JJ is
one establishment and thus wholly subject to the Act. The
Secretary concedes that Double JJ's golf course qualifies as a
separate establishment that is exempt from the Act, and so too
may other recreational services offered by Double JJ.
The First Circuit, in a case involving the definition of
"establishment" as used in the amusement and recreational
establishment exemption, held that:
[s]eparate stores under common ownership may each be
establishments while other aspects of the total operations
of the same company may be found to be outside the
pertinent establishment. See Mitchell v. Bekins Van &
Storage Co., 352 U.S. 1027 (1957), summarily rev'g 231
10 Chao v. Double JJ Resort Ranch, et al. No. 02-2068
F.2d 25 (9th Cir. 1956). Conversely, different ownership
does not prevent closely integrated departments from
being treated as a single establishment, e.g. separately
owned departments in a department store may belong to
one establishment.
Marshall v. New Hampshire Jockey Club, Inc., 562 F.2d
1323, 1330 (1st Cir. 1977). Similarly the language defining
"establishment" in the regulations accompanying the Act,
albeit not the regulations defining the recreational exemption,
set out that "two or more physically separated portions of a
business although located on the same premises and even
under the same roof in some circumstances may constitute
more than one establishment for purposes of exemptions." 29
C.F.R. § 779.305. Under this authority, Double JJ's facilities
related to horseback riding, for example, might qualify as a
separate recreational establishment. Then again, it might not.
We simply cannot tell from this record.
On remand, we believe the test the district court should use
in determining which parts of Double JJ qualifies for the
exemption is set out in 29 C.F.R. § 779.305. See also 1999
WL 1788159 (the opinion of the Wage and Hour
Administrator incorporating the regulation's test). The
regulation explains that for a recreational service, remotely
connected to a non-qualifying business, to qualify as a
separate establishment it must be: (a) physically separate from
the other activities; (b) functionally operated as a separate unit
having separate records and separate bookkeeping; and
(c) have dedicated employees that are not shared between
units. 29 C.F.R. § 779.305. If any of Double JJ's recreational
services meet this test, they should be exempt from the Act's
requirements.
Accordingly, we REVERSE the judgment of the district
court and remand for proceedings consistent with this
opinion.

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