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Solis v. Matheson (Labor and Employment Law)
Filed April 20, 2009
Cite as 0735633

FSLA applies to retail business situated on Indian reservation

Paul Matheson (Paul) was a member of the Puyallup Tribe, a Pacific Northwest Indian tribe. Paul was the owner and operator of Baby Zack’s Smoke Shop (Baby Zack’s) located within the Puyallup Indian Reservation. Goods sold in Baby Zack’s were shipped in from outside locations of Washington. Baby Zack employs Indian as well as non-Indians employees.

Secretary of Labor Hilda L. Solis (Secretary) subpoenaed the books of Baby Zack and determined that Matheson failed to pay overtime wages to its employees as required under the Fair Labor Standards Act.

Subsequently, the Secretary filed a suit and a motion for summary judgment.

The district court found that FLSA applied to Matheson and ordered to pay overtime wages. Failure to pay would prompt the court to hire a receiver appointed by the Secretary or their own choosing.

The district court also ruled that the receiver was authorized to collect assets and report findings, redeem or liquidate assets, turn over proceeds, and prevent waste or fraud.

Consequently, Matheson appealed the district court’s decision of applying the FSLA and appointing a receiver.

On appeal, the appeal court made the following findings:

  1. Applicability of FSLA

    Overtime requirements of FSLA were applied to retail business located on an Indian reservation and owned by members of Indian tribe. While Indian tribes retained powers of self-government, they are dependent on, and subordinate to the federal government.

    Hence, whatever power they have may be limited, modified or eliminated by Congress. The powers provided to them pertain only to their internal relations, customs and social order.

  2. Secretary’s power to audit records

    Secretary Solis had authority to enter Indian reservation to audit business's books just like any private business.

  3. Appointment of receiver

    District court abused its discretion when it ordered the appointment of receiver over a retail business such as Baby Zack. The complaint filed by the secretary did not give notice and provide evidence that would show the necessity of hiring a receiver.

In conclusion, the appeal court affirmed the district court’s decision on the applicability of FSLA and vacated the portion of the judgment regarding the automatic appointment of receiver.

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