Respondent company, a fully integrated real estate management
concern directing from its central office manifold operations at
nine separately owned buildings, including leasing the properties
for the owners and hiring, firing, supervising, and negotiating the
ages of those employed in the buildings, held to be an "enterprise"
within the meaning of § 3(r) of the Fair Labor Standards Act, since
respondent conducts related activities through unified operation or
control, for a common business purpose. It is irrelevant, for
purposes of defining the respondent's enterprise under § 3(r), that
the building owners, who are not defendants in this enforcement
action under the Act, have no relationship with one another and no
common business purpose, since their activities as employers are
not at issue here. Pp.
410 U. S.
516-521.
444 F.2d 609, reversed and remanded.
STEWART, J., delivered the opinion of the Court, in which
BURGER, C.J., and Douglas, BRENNAN, MARSHALL, BLACKMUN, POWELL, and
REHNQUIST, JJ., joined. WHITE, J., filed a dissenting opinion,
post, p.
410 U. S.
521.
Page 410 U. S. 513
MR JUSTICE STEWART delivered the opinion of the Court.
This case began when the Secretary of Labor sued the respondent
real estate management company for alleged violations of the Fair
Labor Standards Act of 1938, as amended, 52 Stat. 1060, 29 U.S.C. §
201
et seq. The Secretary sought an injunction against
future violations of the minimum wage, overtime, and recordkeeping
provisions of the Act, as well as back wages for the affected
employees. An employee is entitled to the benefits of the minimum
wage and maximum hours provisions of the Act if he is,
inter
alia, "employed in an enterprise engaged in commerce or in the
production of goods for commerce. . . ." 29 U.S.C. §§ 206(a),
207(a).
As stipulated in the District Court, the respondent company
manages eight commercial office buildings and one apartment complex
in the Pittsburgh area. With the exception of a minor ownership
interest in one of the buildings, the respondent does not own these
properties. Its services are provided according to management
contracts entered into with the owners. Under these contracts, the
respondent obtains tenants for the buildings, negotiates and signs
leases, institutes whatever legal actions are necessary with
respect to these leases, and generally manages and maintains the
properties. The respondent collects rental payments on behalf of
the owners, and deposits them in separate bank accounts for each
building. These accounts, net of management expenses and the
respondent's fees, belong to the owners of the properties. Payments
are periodically made from the accounts to these owners.
The respondent's services with respect to the supervisory,
maintenance, and janitorial staffs of the buildings are similarly
extensive. The respondent conducts the hiring, firing, payroll
operations, and job supervision of
Page 410 U. S. 514
those employed in the buildings. It also fixes hours of work,
and negotiates rates of pay and fringe benefits -- subject to the
approval of the owners. The respondent engages in collective
bargaining on behalf of the owners where the building employees are
unionized. 324 F. Supp. 987, 990-991.
The District Court held that the maintenance, custodial, and
operational workers at the buildings managed by the respondent were
"employees," and that the respondent was an "employer," within the
meaning of §§ 3(d) and 3(e) of the Act, 29 U.S.C. §§ 203(d), (e).
324 F. Supp. at 992-993. The District Court also held that gross
rentals, rather than commissions obtained, were the proper measure
of "annual gross volume of sales made or business done" for
purposes of the dollar volume portion of the statutory definition
of an "enterprise engaged in commerce."
Id. at 993-994.
[
Footnote 1] Though it rejected
the claim that the respondent was sufficiently engaged in commerce
for its employees to be covered for
Page 410 U. S. 515
the time before the 1966 amendments to the Act went into effect,
[
Footnote 2] the District Court
determined that the aggregate activities of the respondent at all
nine locations were "related," performed under "common control,"
and for "a common business purpose," thereby constituting an
"enterprise" within the meaning of § 3(r), 29 U.S.C. § 203(r). 324
F. Supp. at 994-995.
On cross appeals, the Court of Appeals for the Third Circuit
affirmed the District Court's determination that the respondent is
an "employer" of the building "employees," and also affirmed the
use of gross rentals of the buildings as the proper measure of
"gross sales." 444 F.2d 609, 611-612. The Court of Appeals held
that the District Court erred, however, in aggregating the gross
rentals of the nine properties to determine the "gross sales" of
the respondent's "enterprise." Recognizing that its decision
conflicted with a substantially identical case in the Fourth
Circuit,
Shultz v. Falk, 439 F.2d 340, the Court of
Appeals held that, before separate establishments could be deemed
part of a single enterprise,
Page 410 U. S. 516
a showing of common business purpose was required. 444 F.2d at
613.
"If the record in this case revealed that the retention of the
Company, as agent, were accompanied by a change in the independent
business purposes of the owners -- for example, facts such as the
pooling of profits from the various buildings demonstrating a
common business purpose -- the result might be different. Here,
however, the record reveals that the owners share no common purpose
except the decision to hire the Company as their rental or
management agent. . . . Without more than here presented, we think
the 'enterprise' requirement of the Act has not been
satisfied."
Id. at 614.
Without reaching the issues regarding the respondent's
engagement in commerce prior to 1967, the Court of Appeals reversed
and remanded for proof of the individual gross rentals of the
buildings.
Ibid. In order to resolve the intercircuit
conflict, we granted the Secretary's petition for certiorari, 409
U.S. 840, which raises the question whether the management
activities of the respondent at all of the buildings served should
be aggregated as part of a single "enterprise" within the meaning
of § 3(r) of the Act. Since no cross-petition for certiorari was
filed by the respondent, the important issues of whether the
respondent is in fact, an "employer" of the building workers within
the meaning of the Act, and whether gross rentals, rather than
gross commissions, should serve as the measure of "gross sales,"
are not before us. [
Footnote
3]
The concept of "enterprise" under the Fair Labor Standards Act
came into being with the 1961 amendments, which substantially
broadened the coverage of
Page 410 U. S. 517
the Act. Rather than confining the protections of the Act to
employees who were themselves "engaged in commerce or in the
production of goods for commerce," 29 U.S.C. § 206(a), 207(a), the
new' amendments brought those "employed in an enterprise engaged in
commerce" within the ambit of the minimum wage and maximum hours
provisions. [
Footnote 4] The
Congress defined "enterprise engaged in commerce" to include a
dollar volume limitation. The standard in the original amendments
included
"any such enterprise which has one or more retail or service
establishments if the annual gross volume of sales of such
enterprise is not less than $1,000,000 . . . ,"
75 Stat. 66, and has since been changed to include enterprises
"whose annual gross volume of sales made or business done is not
less than $500,000" for the period from February 1, 1967, to
January 31, 1969, and those with annual gross sales of not less
than $250,000 thereafter. 29 U.S.C. § 203(s)(1). The presence of
this dollar volume cut-off for coverage under the Act, in turn,
places importance on the Act's definition of "enterprise."
The term "enterprise" is defined by the statute as follows:
"'Enterprise' means the related activities performed (either
through unified operation or common control) by any person or
persons for a common business purpose, and includes all such
activities
whether performed in one or more establishments
or by one or more corporate or other organizational units. . .
."
29 U.S.C. § 203(r) (emphasis added). Specific exemptions are
noted, making clear that exclusive dealership arrangements,
collective purchasing pools, franchises, and leases of business
premises from large
Page 410 U. S. 518
commercial landlords do not create "enterprises" within the
meaning of the Act.
Ibid.
The District Court correctly identified the three main elements
of the statutory definition of "enterprise": related activities,
unified operation or common control, and common business purpose.
We believe the Court of Appeals erred in holding that the aggregate
management activities of the respondent failed to meet these
statutory criteria. Once the respondent is recognized to be the
employer of all of the building employees, it follows quite simply
that it is a single enterprise under the Act. The respondent is,
after all, but one company. Its activities in all of the buildings
are virtually identical, and are plainly "related" in the sense
that Congress intended. As the Senate report accompanying the 1961
amendments indicated: "Within the meaning of this term, activities
are
related' when they are the same or similar. . . ." S.Rep.
No. 145, 87th Cong., 1st Sess., 41. The respondent's activities,
similarly, are performed "either through unified operation or
common control." The respondent is a fully integrated management
company directing operations at all nine buildings from its central
office. For purposes of determining whether it is an "enterprise"
under the Act, it is irrelevant that the relationship between the
respondent and the owners is one of agency; that separate bank
accounts are maintained for each building; and that the risk of
loss and the chance of gain on capital investment belong to the
owners, not the respondent. All that is required under the
statutory definition is that the respondent's own activities be
related and under common control or unified operation, as they
plainly are.
In its analysis of this problem, the Court of Appeals placed
great weight on the fact that the building owners have no
relationship with one another, and have no common business purpose.
This is true, but beside the point,
Page 410 U. S. 519
for the owners are not defendants in this action and it is not
their activities that are under examination. As Judge
Winter wrote in the conflicting case from the Fourth Circuit,
"It is
defendants' activities at each building which
must be held together by a common business purpose, not all the
activities of all owners of apartment projects."
Shultz v. Falk, 439 F.2d at 346. In the present case,
the respondent's activities at the several locations are tied
together by the common business purpose of managing commercial
properties for profit. The fact that the buildings are separate
establishments is specifically made irrelevant by § 3(r).
The Court of Appeals also cited the portion of the Senate report
explaining the exemptions to § 3(r), noted above, for exclusive
dealing contracts, franchises, leasing space in shopping centers,
and the like:
"The bill also contains provisions which should insure that a
small local independent business, not, in itself, large enough to
come within the new coverage, will not become subject to the act by
being considered a part of a large enterprise with which it has
business dealings."
"The definition of 'enterprise' expressly makes it clear that a
local retail or service establishment which is under independent
ownership shall not be considered to be so operated and controlled
as to be other than a separate enterprise because of a franchise,
or group purchasing, or group advertising arrangement with other
establishments or because the establishment leases premises from a
person who also happens to lease premises to other retail or
service establishments."
S.Rep. No. 145, 87th Cong., 1st Sess., 41. The Court of Appeals
went on to stress that the building owners should not be brought
under the Act simply be
Page 410 U. S. 520
cause they dealt with a large real estate management company.
This is true, but also beside the point, since we deal here with
that large management company as a party and, for purposes of this
case, as an employer of the employees in question. We do not hold,
nor could we in this case, that the individual building owners, in
their capacity as employers, [
Footnote 5] are to be aggregated to create some abstract
"enterprise" for purposes of the Fair Labor Standards Act.
[
Footnote 6]
It is argued that such a straightforward application of the
statutory criteria to the respondent's business ignores the
significance of the dollar volume limitation included in the § 3(s)
definition of "[e]nterprise engaged in commerce or in the
production of goods for commerce." The Court of Appeals cited
evidence in the legislative history of the 1961 amendments that
indicates a purpose to exempt small businesses from the obligations
of the Act. 444 F.2d at 613; S.Rep. No. 145, 87th Cong., 1st Sess.,
5. If the individual building owners are engaged in enterprises too
small to come within the reach of the Fair Labor Standards Act,
reasoned the Court of Appeals, it would be "anomalous" to treat
them as a single enterprise subject to the Act "merely because they
hire a rental agent who manages other buildings." 444
Page 410 U. S. 521
F.2d at 614. Once again, however, the response to this argument
is that it is the respondent management company, not the individual
building owners, that has been held in this case to be an
"employer" of all the affected "employees." Furthermore, the proper
measure of the respondent's size has been held to be the gross
rentals produced by properties under its management. It is true
that one purpose of the dollar-volume limitation in the statutory
definition of "enterprise" is the exemption of small businesses,
but this respondent is not such a business under these holdings of
the Court of Appeals. [
Footnote
7] The argument to the contrary amounts to a collateral attack
on the "employer" and "gross sales" determinations made below, and
the respondent cannot make such an attack in the absence of a
cross-petition for certiorari. [
Footnote 8]
We hold that the District Court was correct in aggregating all
of the respondent's management activities as a single "enterprise."
Accordingly, the judgment of the Court of Appeals is reversed, and
the case is remanded to the Court of Appeals for further
proceedings consistent with this opinion.
It is so ordered.
[
Footnote 1]
In pertinent part, the statute provides that:
"(s) 'Enterprise engaged in commerce or in the production of
goods for commerce' means an enterprise which has employees engaged
in commerce or in the production of goods for commerce, including
employees handling, selling, or otherwise working on goods that
have been moved in or produced for commerce by any person, and
which --"
"(1) during the period February 1, 1967, through January 31,
1969, is an enterprise whose annual gross volume of sales made or
business done is not less than $500,000 (exclusive of excise taxes
at the retail level which are separately stated) or is a gasoline
service establishment whose annual gross volume of sales is not
less than $250,000 (exclusive of excise taxes at the retail level
which are separately stated), and beginning February 1, 1969, is an
enterprise whose annual gross volume of sales made or business done
is not less than $250,000 (exclusive of excise taxes at the retail
level which are separately stated). . . ."
29 U.S.C. § 203 (s).
[
Footnote 2]
Section 3(s)(3) of the Act, as enacted in 1961, referred in its
definition of "[e]nterprise engaged in commerce or in the
production of goods for commerce,"
inter alia, to:
"
any establishment of any such enterprise . . . which has
employees engaged in commerce or in the production of goods for
commerce if the annual gross volume of sales of such
enterprise is not less than $1,000,000. . . ."
Pub.L. 87-30, 75 Stat. 65, 66 (emphasis added). The District
Court construed the statute to require that two or more employees
in each building be engaged in commerce in order for that building
to be covered under the Act. It found that in no building were
there two such employees, and therefore held that there was no
coverage under the Act prior to the 1966 amendments. 324 F. Supp.
987, 995-997. The 1966 amendments,
see n 1,
supra, required only that the
"enterprise" have "employees" engaged in commerce, and, under this
standard, the District Court found that the respondent qualified.
Id. at 997. Though the Government appealed on this issue,
the Court of Appeals did not reach it, 444 F.2d 609, 614.
[
Footnote 3]
NLRB v. International Van Lines, 409 U. S.
48,
409 U. S. 52 n.
4, and cases there cited.
But see n 8,
infra.
[
Footnote 4]
Pub.L. 87-30, 75 Stat. 65, 67, 69.
[
Footnote 5]
As both the District Court and the Court of Appeals noted, the
statutory concept of "employer" is "any person acting directly or
indirectly in the interest of an employer in relation to an
employee. . . ." 29 U.S.C. § 203(d). This definition was held to be
broad enough that there might be "several simultaneous
employers.'" 444 F.2d at 611-612. See also 324 F.
Supp. 987, 992; Wirtz v. Hebert, 368 F.2d 139;
Mid-Continent Pipe Line Co. v. Hargrave, 129 F.2d
655.
[
Footnote 6]
Contrary to the view taken by the dissent, we specifically do
not hold that "the buildings and the management company
collectively are an enterprise. . . ." We deal solely with the
management company and its "related activities performed . . . for
a common business purpose."
[
Footnote 7]
It is stipulated that, in all relevant years, the annual gross
rental income collected by the respondent exceeded $1,000,000. 324
F. Supp. at 993.
[
Footnote 8]
We have granted certiorari in No. 72-844,
Falk v. Brennan,
sub nom. Falk v. Shultz, post, p. 954, to consider whether the
proper measure of "gross sales" in this context is gross rentals
collected or gross commissions, and whether maintenance employees
are "employees" of the management company within the meaning of the
Act.
MR. JUSTICE WHITE, dissenting.
It is undisputed that, for the minimum wage and maximum hour
requirements of the Fair Labor Standards Act, 52 Stat. 1060, as
amended, 29 U.S.C. § 201
et seq., to apply, to all the
employees involved in this case, they must be employed in an
"enterprise engaged in commerce
Page 410 U. S. 522
or in the production of goods for commerce." [
Footnote 2/1] 29 U.S.C. §§ 203(s), 206, and 207. An
"enterprise" for the purpose of the Act
"means the related activities performed (either through unified
operation or common control) by any person or persons for a common
business purpose. . . ."
Id. § 203(r). An enterprise, however, does not include
the related activities performed for the enterprise by an
independent contractor or other specified arrangements, including
otherwise independent establishments occupying premises leased to
them by the same person.
Ibid.
But, for an "enterprise" to be "engaged in commerce or in the
production of goods for commerce," the enterprise must have an
"annual gross volume of sales made or business done" in an amount
not less than the specified statutory minimum.
Id. §
203(s)(1). Congress did not intend to cover all establishments by
expanding the coverage of the Act through the enterprise approach.
Instead, it drew an economic line. "It is the line which the
Congress must draw in determining who shall and who shall not be
covered by a minimum wage." S.Rep. No. 145, 87th Cong., 1st Sess.,
5. Nor was the definition of enterprise intended to swallow up the
exclusion of small businesses. Related activities conducted by
separate businesses would be considered a part of an enterprise
only "where they are joined either through unified operation
Page 410 U. S. 523
or common control into a unified business system or economic
unit to serve a common business purpose."
Id. at 41. And
the express exemptions provided in § 203(r) from the enterprise
concept, the Senate Report said, would
"insure that a small local independent business, not, in itself,
large enough to come within the new coverage, will not become
subject to the act by being considered a part of a large enterprise
with which it has business dealings."
Ibid.
In the case before us, nine separately and independently owned
buildings leasing space to tenants employed the same management
company as agent to recommend tenants, collect rents, hire, fire,
and supervise employees, and maintain and operate the buildings.
The Court holds that, even if none of the individual building
owners would itself generate gross rentals in sufficient amount to
be covered by the Act, the buildings and the management company
collectively are an enterprise with collective gross rentals in
excess of the statutory minimums and hence covered by the Act.
[
Footnote 2/2] Because it appears
to me that the Court is applying the concept of enterprise in a way
which ignores the economic limitations in the Act and the
congressional intention they represent, I respectfully dissent.
There is no connection between these separately owned buildings
other than the fact that they employ the same management company to
represent them. They have a common managing agent, but that agent
is separately accountable to, and must follow the perhaps diverse
directions of, each of its principals. They have no unified
operation, do not constitute a unified business system or an
economic unit, and surely do not serve a common
Page 410 U. S. 524
business purpose. Hence, there is no "enterprise" within the
meaning of the Act which covers only those "related activities"
performed through unified operation or common control "for a common
business purpose."
As I have indicated, Congress was not unaware of the possibility
of stretching the concept "enterprise" beyond its proper bounds,
and sought to guard against it. The Senate Committee said:
"Thus, the mere fact that a group of independently owned and
operated stores join together to combine their purchasing
activities or to run combined advertising will not, for these
reasons, mean that their activities are performed through unified
operation or common control, and they will not, for these reasons,
be considered a part of the same 'enterprise.' S.Rep. No. 145, 87th
Cong., 1st Sess., 42. Common agents, therefore, are not sufficient
to convert otherwise independent entities into an enterprise."
The Committee also said:
"There may be a number of different types of arrangements
established in such cases. The key in each case may be found in the
answer to the question,"
"Who receives the profits, suffers the losses, sets the wages
and working conditions of employees, or otherwise manages the
business in those respects which are the common attributes of an
independent businessman operating a business for profit?"
Ibid.
Under this standard, there can be no question that the buildings
are separate economic units, and should be treated as such. The
manager receives merely a commission for his services. The managing
agent manages, but is subject to direction by his principal. The
income and expenses for each building are accounted for separately.
The owner of each building receives the profits and suffers the
losses, if any. Each owner sets the wages and working conditions
for each building in the sense that, although the manager
negotiates such matters, he negotiates under instructions, and it
is each owner who
Page 410 U. S. 525
must approve them. Each building carries a separate employer
identification number. Employees are hired with respect to each
building, and supplies and other items necessary for the operation
of the buildings are purchased separately for each building. Should
a particular building terminate its relationship with the manager,
the building employees remain with the building.
The Arnheim & Neely agency unquestionably was an "employer"
insofar as its relationship to each of the buildings was concerned,
for 29 U.S.C. § 203(d) defines the term employer as including "any
person acting directly or indirectly in the interest of an employer
in relation to an employee. . . ." But this is a far cry from
concluding that the separate buildings and their common agent
constitute an enterprise engaged in commerce. [
Footnote 2/3]
Unquestionably, it is the individual owner who bears the burden
of the Act, and if any one of them, or each of them, individually
has gross sales less than the jurisdictional minimums mentioned in
the Act, construing the work "enterprise" concept as the majority
does distorts clear congressional intent.
[
Footnote 2/1]
As discussed in the majority opinion, the Act as passed in 1938,
52 Stat. 1060, covered only employees "engaged in commerce or in
the production of goods for commerce." The 1961 amendments, 75
Stat. 65-67, 69, greatly broadened the scope of the Act by adding
the "enterprise" concept to cover those employees not directly
engaged in commerce or in the production of goods for commerce but
employed by an "enterprise" that was. Therefore, those employees in
this case not engaged in commerce or in the production of goods for
commerce, must belong to an "enterprise" so engaged if they are to
be covered.
[
Footnote 2/2]
If I agreed that the building owners and their common agent were
an "enterprise," I would also agree that the cumulative gross
rentals would be the proper measure of coverage.
[
Footnote 2/3]
This is demonstrated by 29 CFR § 779.203, which provides that
the "terms [
employer,' `establishment,' and `enterprise'] are
not synonymous."