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Home » Affirmative Defenses » S.D.Fla.: Business-to-Business Merchants’ Motion For Summary Judgment On “Retail” Exemption Denied; Defendants Failed To Plead The Exemption As An Affirmative Defense And Lack A Retail Concept, Because They Only Provide Services To Other Merchants

S.D.Fla.: Business-to-Business Merchants’ Motion For Summary Judgment On “Retail” Exemption Denied; Defendants Failed To Plead The Exemption As An Affirmative Defense And Lack A Retail Concept, Because They Only Provide Services To Other Merchants

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Ebersole v. American Bancard, LLC

Defendants moved for summary judgment asserting that they are exempt from the FLSA as a “retail and service establishment,” as well as because Plaintiff has not presented sufficient facts to demonstrate that they were aware of Plaintiff’s alleged uncompensated overtime work.

The Court recited the following fact, as pertinent to its inquiry as to whether Defendants were a “retail and service establishment”:

“American Capital Advance, LLC (“ACA”) is a Florida limited liability company located in Boca Raton, Florida. ACA provides the services to merchants of business cash advances, also referred to as accounts receivable financing or accounts receivable factoring, to qualified businesses. American Bancard, LLC (“AB”) is a Florida limited liability company located in Boca Raton, Florida, and is ACA’s parent company.  As a merchant services provider, AB’s primary focus is to make available to merchants the service of credit and debit/check card processing services and processing equipment.”

The Court then held that Defendants are not a “retail and service establishment”:

“Defendants argue that they are exempt from the overtime provisions of the FLSA because they are a retail and service establishment under § 207(i) of the FLSA. Defendant bears the burden of establishing that they are entitled to the exemption. Alvarez Perez v. Sanford-Orlando Kennel Club, Inc., 515 F.3d 1150, 1156 (11th Cir.2008). No statutory definition of “retail or service establishment” currently exists.

When Congress passed Section 207(i) in 1961, it specifically stated that the phrase “retail or service establishment” was to be given the same meaning as the phrase in Section 213(a)(2). The definition of this phrase in Section 213(a)(2), however, was repealed in 1990. Nevertheless, courts have found that this definition is still applicable to Section 207(i) since no Congressional intent has been shown to modify the definition. See, e.g.,
29 C.F.R. §§ 779.301, 779.312; Reich v. Delcorp, Inc., 3 F.3d 1181, 1183 (8th Cir.1993); Reich v. Cruises Only, Inc., No. 95-cv-660, 1997 WL 1507504, at *2 (M.D. Fla. June 5, 1997). Section 213(a)(2) defined a retail or service establishment as: (1) an establishment 75 per centum of whose annual dollar volume of sales of goods or services (or of both) is not for resale and (2) is recognized as retail sales or services in the particular industry. 29 U.S.C. § 213(a)(2) (repealed 1990).

Defendants claim to fall within the retail and services exception “since they meet the basic requirements of subsections (1) and (2) [above] and are recognized in the credit industry as a service provider. ACA provides the service to merchants of business cash advances … As a merchant services provider, AB’s primary focus is to make available to merchants the service of credit and debit/check card processing services and processing equipment.” DE 19 at 5-6.

Federal regulations clarify that this exemption applies only to a “traditional local retail or service establishment.” 29 C.F.R. § 779.315. Such establishments must be part of industries that have a “retail concept.” Id. § 779.316. One provision explains:

Typically a retail or service establishment is one which sells goods or services to the general public. It serves the everyday needs of the community in which it is located. The retail or service establishment performs a function in the business organization of the Nation which is at the very end of the stream ofdistribution, disposing in small quantities of the products and skills of such organization and does not take part in the manufacturing process.  Id. § 779.318. Defendants sell machines and services to merchants. Defendants’ industry does not have a “retail concept,” and Defendants do not claim they sell goods or services to the general public.

The Eleventh Circuit has pointed out that the Supreme Court requires “that courts closely circumscribe the FLSA’s exceptions.” Nicholson v. World Bus. Network, Inc., 105 F.3d 1361, 1364 (11th Cir.1997). And the exemption “is to be applied only to those clearly and unmistakably within the terms and spirit of the exemption.” Brock v. Norman’s Country Market, Inc., 835 F.2d 823, 826 (11th Cir.1988) (quotation marks and cite omitted); Nicholson v. World Business Network, Inc., 105 F.3d 1361, 1364 (11th Cir.1997). Therefore, narrowly construing the claimed exemption to the FLSA overtime requirement, this Court finds that Defendants have not demonstrated, as a matter of law, that they are retail or service establishments exempt from the FLSA’s overtime pay provisions. Morgan v. Family Dollar Stores, Inc., 551 F.3d 1233, 1269 (11th Cir.2008).”


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