The U.S. Supreme Court case A.H. Phillips, Inc. v. Walling involved a dispute over whether the Fair Labor Standards Act of 1938 applied to employees of a retail store that also engaged in wholesale operations for approximately half its business volume. The plaintiff, A.H Phillips, argued that their employees were exempt from wage and hour regulations under the Act because they worked for a "retail establishment." However, the Wage and Hour Division Administrator disagreed with this interpretation due to significant portion of company's revenue coming from non-retail (wholesale) activities. In its decision, the Supreme Court sided with Walling by ruling that an establishment could not be considered purely retail if more than 25% of its sales were made for resale (i.e., wholesale). Therefore, it held that such establishments are subject to federal wage and hour laws regardless of how much direct-to-consumer selling they do as part of their overall business operation.

In the dissenting opinion for A. H. Phillips, Inc. v. Walling, Justice Frankfurter disagreed with the majority's interpretation of "retail or service establishment" under Section 13(a)(2) of the Fair Labor Standards Act (FLSA). He argued that a broader understanding was necessary to reflect Congress' intent and protect workers from exploitation by employers seeking to evade wage and hour regulations through creative business models or structures. The justice contended that an overly narrow definition would exclude many businesses engaged in retail activities as commonly understood, thereby undermining FLSA’s purpose: ensuring fair labor standards across industries and preventing unfair competition based on substandard wages or working conditions.