Respondent brought this action to enjoin petitioners (hereafter
D & F), a fully integrated partnership managing apartment
complexes for a fixed percentage of the gross rentals collected
from each project, from minimum wage and other violations of the
Fair Labor Standards Act. The District Court dismissed the
complaint, adopting D & F's contentions that it does not have a
$500,000 "annual gross volume of sales made or business done," and
thus does not come within the term "enterprise engaged in commerce"
as defined in § 3(s) of the Act, and that it is not an employer,
within the meaning of § 3(d), of the maintenance personnel who are
paid from the rentals received at the apartment complexes where
they work. The Court of Appeals reversed, holding that D & F
met the statutory definition of "employer" and that, in determining
whether the enterprise satisfies the dollar volume limitation, it
is the gross rentals (which exceed $500,000 annually) that D &
F collects at all the apartment complexes that must be considered,
rather than the gross commissions that D & F receives from the
apartment owners.
Held:
1. D & F, whose managerial responsibilities at each of the
buildings give it substantial control of the terms and conditions
of the work of employees at those buildings, is an "employer" under
the expansive definition of the term in § 3(d) of the Act. P.
414 U. S.
195.
2. D & F sells only its professional management services,
and the gross rentals it collects as part of those services do not
represent sales attributable to its enterprise. D & F's
commissions are therefore the relevant measure of its gross sales
made or business done for purposes of the dollar volume limitation
in § 3(s)(1). Thus, though D & F is an "enterprise" under 3(r),
Brennan v. Arnheim & Neely, Inc., 410 U.
S. 512, the Act does not apply to D & F, as its
commissions are below the § 3(s)(1) limitation. Pp.
414 U. S.
195-201.
Vacated and remanded.
Page 414 U. S. 191
STEWART, J., delivered the opinion of the Court, in which
BURGER, C.J., and BLACKMUN, POWELL, and REHNQUIST, JJ., joined.
BRENNAN, J., filed an opinion concurring in part and dissenting in
part, in which DOUGLAS, WHITE, and MARSHALL, JJ., joined,
post, p.
414 U. S.
202.
MR. JUSTICE STEWART delivered the opinion of the Court.
The Secretary of Labor initiated this action against the
petitioners, partners in a real estate management company, for an
injunction against future violations of various provisions of the
Fair Labor Standards Act of 1938, 2 Stat. 1060, as amended, 29
U.S.C. § 201
et seq., and for back wages allegedly due to
employees affected by past violations of the Act. [
Footnote 1] The petitioners' defense was that
they are not "employers" [
Footnote
2] of the employees involved, and that their business is not a
single "enterprise" that is subject to the Act's requirements. This
latter contention brought together two separate arguments. First,
the petitioners contended that their combined
Page 414 U. S. 192
activities do not constitute an "enterprise," as that term is
defined in § 3(r), 29 U.S.C. § 203(r). Second, the petitioners
argued, even if their business activities do amount to an
"enterprise," they are not an "[e]nterprise engaged in commerce or
in the production of goods for commerce," as that term is defined
in § 3(s), 29 U.S.C. § 203(s), because they do not have an "annual
gross volume of sales made or business done" of $500,000. [
Footnote 3] Under the partnership name
of Drucker & Falk (D & F), the petitioners render
management services for the owners of a number of apartment
complexes in the State of Virginia. Under its contracts with the
apartment owners, D & F agrees to perform, on behalf of each
owner and under his nominal supervision, virtually all management
functions that are ordinarily required for the proper functioning
of an apartment complex. [
Footnote
4] These contracts are for a stated term of not less than one
year. Each party can terminate the arrangement by giving the other
party 30 days' notice of his intent to do so. Neither D & F nor
any of its partners hold any property interest in the buildings
that D & F manages. D & F receives as compensation a
fixed
Page 414 U. S. 193
percentage of the gross rentals collected from each project.
[
Footnote 5]
The rentals collected by D & F are deposited in local bank
accounts. [
Footnote 6] From
these accounts it pays all expenses incurred in operating and
maintaining the buildings. After deducting its compensation, as
well as any other applicable expenses, D & F transmits payments
to the various owners on a periodic basis. If disbursements for any
apartment complex exceed its gross rental receipts, the owner is
required under the contract to reimburse D & F.
The subject of the Secretary's complaint was the wages and hours
of the maintenance personnel who work at each of the apartment
complexes, the contention being that D & F is in violation of
the minimum wage, overtime, and recordkeeping provisions of the Act
with respect to these maintenance workers. These employees work
under the supervision of D & F and are paid from the rentals
received at the apartment complexes where they are employed. They
are considered in the contracts between the owners and D & F as
"employees of the project owners."
In the District Court, D & F contended that its management
activities at the several apartment complexes do not constitute a
single "enterprise," as that term is defined in § 3(r) of the Act,
29 U.S.C. § 203(r); that, even if its business is a single
"enterprise," it does not have the $500,000 "annual gross volume of
sales made or business done" required by § 3(s)(1), 29 U.S.C. §
203(s)(1), for coverage by the Act; and that it is not an
"employer" of these maintenance workers, as that term
Page 414 U. S. 194
is defined in § 3(d), 29 U.S.C. § 203(d). The District Court
agreed with all three of these contentions and dismissed the
complaint. The Court of Appeals reversed. It held that the
management activities performed by D & F constitute a single
"enterprise" for coverage purposes, and that D & F meets the
statutory definition of "employer" with respect to the maintenance
workers. The appellate court also concluded that, in determining
whether the enterprise satisfies the dollar volume limitation, it
is the gross rentals that D & F collects at all the apartment
complexes that must be considered, rather than, as the District
Court had held, the gross commissions that D & F receives from
the apartment owners. Since there is no question that these gross
rentals exceed $500,000 annually, the court held that D & F is
subject to the Act and in violation thereof with respect to the
maintenance workers.
We granted certiorari to review this judgment of the Court of
Appeals. [
Footnote 7] Two days
later, we held, in
Brennan v. Arnheim Neely, Inc.,
410 U. S. 512
(1973), that a fully integrated real estate management company that
directs management operations at several separately owned buildings
was a single "enterprise" for purposes of the Act, thus confirming
the holding of the Court of Appeals on that issue in the present
case. But our decision in
Arnheim & Neely did not
reach the other two statutory questions raised by D & F. We
accordingly
Page 414 U. S. 195
limited the grant of certiorari to questions 2 and 3 presented
by the petition:
"(2) Under the Fair Labor Standards Act, to be covered, an
enterprise must have an 'annual gross volume of sales made or
business done' of $500,000. Is this figure to be measured by the
gross rentals collected by the agent, or by that agent's gross
commissions?"
"(3) Are maintenance workers employed at the buildings managed
by petitioners employees of the apartment owner or of the
petitioners?"
410 U.S. 954.
I
As to question 3, the "employees" issue, it is clear that the
maintenance workers are employees of the building owners. But we
think that the Court of Appeals was unquestionably correct in
holding that D & F is also an "employer" of the maintenance
workers under § 3(d) of the Act, which defines "employer" as "any
person acting directly or indirectly in the interest of an employer
in relation to an employee." 29 U.S.C. § 203(d). Section 3(e)
defines "employee" to include "any individual employed by an
employer." 29 U.S.C. § 203(e). In view of the expansiveness of the
Act's definition of "employer" and the extent of D & F's
managerial responsibilities at each of the buildings, which gave it
substantial control of the terms and conditions of the work of
these employees, we hold that D & F is, under the statutory
definition, an "employer" of the maintenance workers. We turn,
therefore, to the other question embraced in the grant of
certiorari.
II
In
Brennan v. Arnheim & Neely Inc., supra, we held
that the integrated operations of a real estate management company
satisfied the definition of "enterprise"
Page 414 U. S. 196
under § 3(r) of the Act. This holding was based upon the
conclusion that the management activities met the three statutory
tests of an "enterprise": related activities, unified operation or
common control, and common business purpose. It is important to
understand, however, that the "enterprise" the Court found in
Arnheim & Neely consisted of the sale of management
services by the respondent. The Court did not hold that the
separate property interests of each apartment owner were to be
considered part of the management enterprise of Arnheim &
Neely. Indeed, § 3(r) and the legislative history of the 1961
"enterprise amendments" to the Act strongly suggest that the use of
common agents by independent entities is not sufficient to convert
to a single "enterprise" what otherwise are independent businesses.
[
Footnote 8] Thus, D & F's
enterprise in the present
Page 414 U. S. 197
case, as in
Arnheim & Neely, consists of and is
limited to its combined management activities at the various
apartment complexes.
The Act imposes its requirements not on every "enterprise," but
only on an "enterprise engaged in commerce or in the production of
goods for commerce." [
Footnote
9] One of the statutory elements of the latter term is the
dollar volume limitation, which in this case is $500,000 annually.
[
Footnote 10] The bone of
contention between the Secretary and D & F is whether this
dollar volume limitation is to be measured by the annual gross
rentals collected by D & F as agent of the apartment owners, or
by the gross commissions paid to D & F by the owners as
compensation for its management services. Section 3(s)(1), which
prescribes the dollar volume limitation, speaks of "an enterprise
whose annual gross volume of sales made or business done
is not less than $500,000." 29 U.S.C. § 203(s)(1). (Emphasis
added.) This statutory language requires that, after determining
what the relevant enterprise is, we turn our attention to what
that enterprise sells or to what business
it
does.
Any doubt about whether the rental of space is a "sale" for
purposes of the Act was removed when Congress amended § 3(s) in
1966 to provide that the dollar volume limitation would henceforth
be measured by "annual gross volume of sales made or
business
done," 80 Stat. 831 (emphasis added). The Senate Report on the
1966 amendments makes clear that the added language was intended to
dispel any uncertainty that revenue derived from services, rentals,
or loans, even though perhaps not literally "sales," was
nevertheless to be considered in
Page 414 U. S. 198
measuring the dollar volume limitation of § 3(s). The Report
indicates that the amendment was intended to signify legislative
approval of the result in
Wirtz v. Savannah Bank & Trust
Co., 362 F.2d 857, which so interpreted § 3(s) as it read
before the addition of the "business done" language. As the Senate
Report explained:
"The annual gross volume of sales made or business done by an
enterprise, within the meaning of section 3(s), will thus continue
to include both the gross dollar volume of the sales . . . which it
makes, as measured by the price paid by the purchaser for the
property or services sold to him . . . and the gross dollar volume
of any other business activity in which the enterprise engages
which can be similarly measured on a dollar basis. This would
include, for example, such activity by an enterprise as making
loans or renting or leasing property of any kind."
S.Rep. No. 1487, 89th Cong., 2d Sess., 7-8. But, a determination
that rentals are "sales made or business done" within the meaning
of the Act does not begin to dispose of the issue before us. The
question remains, under § 3(s)(1), what enterprise made the sales
or did the business.
The Secretary contends that the "sales made or business done" by
D & F includes the gross rental income of apartments in the
buildings that it manages. He argues that the fact that D & F
does not own the buildings should not preclude attribution of the
rentals to it. D & F argues that it sells only managerial
services, and thus that the rentals it collects on behalf of the
owners are not "sales made or business done" by its enterprise. It
contends, therefore, that its gross sales should be measured not by
the rentals it collects from the tenants, but rather by
Page 414 U. S. 199
the management fees that the owners pay it as compensation for
its services --
i.e., its gross commissions.
The line between a seller of a product and a seller of a service
is not always readily discernible, especially when one of the
services relates to the sale of a product or, what amounts to the
same thing for purposes of the Act, the rental of space. As an
abstract proposition, the Secretary is undoubtedly correct in his
position that ownership is not necessarily determinative in
attributing "sales made or business done" for purposes of the
statute. For example, a consignment seller's gross sales might
properly be measured by his gross receipts from sales of the
product, even though he did not actually hold title to the product
that he sold. Realistically, such a seller is in the business of
selling the product that is consigned to him, and he is
functionally in a position no different from that of a seller who
has purchased the product before resale. The only practical
difference may be that the "cost of goods sold" element of the
profit equation is expended before resale in the one case and after
resale in the other.
In the present case, however, we are convinced that the
enterprise of D & F is limited to the sale of its professional
management services, and, accordingly, that the commissions it
receives are the relevant measure of its gross sales made or
business done for purposes of the dollar volume limitation in §
3(s)(1). D & F collects a number of rentals on behalf of the
property owners. In nearly every case, these rentals are paid
pursuant to lease agreements of significant duration. Some may
predate D & F's management of the premises, and D & F may
thus have had absolutely nothing to do with the "sales" underlying
the periodic rentals it collects for the owner. [
Footnote 11]
Page 414 U. S. 200
When a lease does expire and is not renewed by the tenant, D
& F undertakes to find a new tenant for the owner and serves as
agent for the owner in the negotiation and execution of a new
lease. With respect to such a lease, a colorable argument can be
made for attribution of the rentals to D & F, since its
negotiation of a new lease increases, or at least maintains, the
volume of rents collected, and thus also its percentage
compensation. But such an argument does not withstand any but the
most superficial analysis.
In the typical commodity sale, the seller's remuneration is a
function of the gross margin between the cost of the product to him
and the resale price. At first blush, the determination of D &
F's compensation as a percentage of the gross rentals seems
somewhat akin to the margin of the typical seller. Upon reflection,
however, a critical difference appears: when a lease is negotiated
by D & F, its remuneration is calculated not from the proceeds
derived from that lease, but only from the rentals collected during
its managerial tenure, during which period it renders significant
and substantial management services beyond its earlier service in
negotiating the lease. It is clear, therefore, that the business of
the D & F enterprise is not the sale of a product (the rental
of realty), but a sale of professional management services. This
conclusion follows logically from our holding in
Arnheim &
Neely that the relevant enterprise for purposes of deciding
whether a real estate management company is covered by the Act,
consists of its "aggregate management
Page 414 U. S. 201
activities" at the various buildings that it supervises. 410
U.S. at
410 U. S. 519.
In this regard, the commissions received by D & F differ even
from the compensation received by the typical broker of realty or
stock, whose primary undertaking is to negotiate a sale of the
principal's property and whose compensation is calculated on the
proceeds of that sale.
On these facts, we think the conclusion is inescapable that D
& F vends only its professional management services, and that
the gross rentals it collects as part of these services do not
represent sales attributable to its enterprise. It follows that the
correct measure of the "gross volume of sales made or business
done" by D & F is the gross commissions it receives from the
apartment owners as compensation for the management services it
renders. [
Footnote 12] Since
these commissions did not reach $500,000 annually during the period
involved in this litigation, it follows that D & F was not an
"[e]nterprise engaged in commerce or in the production of goods for
commerce," within the meaning of the Act.
Page 414 U. S. 202
The judgment of the Court of Appeals is vacated, and the case is
remanded to the District Court for further proceedings consistent
with this opinion. [
Footnote
13]
It is so ordered.
[
Footnote 1]
The complaint alleged violations of the minimum wage (29 U.S.C.
§ 206(b)), overtime (29 U.S.C. § 207(a)(2)), and recordkeeping (29
U.S.C. § 211(c)) provisions of the Act.
[
Footnote 2]
Section 3(d), 29 U.S.C. § 203(d), states that an "
Employer'
includes any person acting directly or indirectly in the interest
of an employer in relation to an employee."
[
Footnote 3]
The dollar volume limitation was $500,000 at all times relevant
to this action. 29 U.S.C. § 203(s)(1). On February 1, 1969, the
dollar volume limitation was reduced to $250,000. ___,
[
Footnote 4]
D & F performs all the functions required for leasing,
maintaining, and operating the apartment buildings. These include
advertising the availability of apartments for rent; signing,
renewing, and canceling leases; collecting rents; instituting,
prosecuting, and settling all legal proceedings for eviction,
possession of the premises, and unpaid rent; making necessary
repairs and alterations; negotiating contracts for essential
utilities and other services; purchasing supplies; paying bills;
preparing operating budgets for the property owners' review and
approval; submitting periodic reports to the owners; and hiring and
supervising all employees required for the operation and
maintenance of the buildings and grounds.
[
Footnote 5]
The commission that D & F receives varies between 4% and 6%,
depending on the particular arrangements with the building
owner.
[
Footnote 6]
The rents for all the buildings managed by D & F totaled
over $7,700,000 in 1967 and over $8,600,000 in 1968.
[
Footnote 7]
Both the District Court and the Court of Appeals had this case
before them twice. Initially, the District Court dismissed the
complaint. The Court of Appeals reversed and remanded for further
proceedings.
Shultz v. Falk, 439 F.2d 340. The petitioners
sought certiorari, and we denied the writ.
Falk v.
Hodgson, 404 U.S. 827 (1971). On remand to the District Court,
the petitioners resisted the imposition of judgment and
particularly the awarding of prejudgment interest. The District
Court rendered judgment against the petitioners and awarded
prejudgment interest. The Court of Appeals affirmed, and the
petitioners again sought certiorari.
[
Footnote 8]
Section 3(r), 29 U.S.C. § 203(r) provides, in pertinent
part:
"[A] retail or service establishment which is under independent
ownership shall not be deemed to be so operated or controlled as to
be other than a separate and distinct enterprise by reason of any
arrangement, which includes, but is not necessarily limited to, an
agreement, (1) that it will sell, or sell only, certain goods
specified by a particular manufacturer, distributor, or advertiser,
or (2) that it will join with other such establishments in the same
industry for the purpose of collective purchasing, or (3) that it
will have the exclusive right to sell the goods or use the brand
name of a manufacturer, distributor, or advertiser within a
specified area, or by reason of the fact it occupies premises
leased to it by a person who also leases premises to other retail
or service establishments."
The Senate Report on the 1961 amendments to the Act included the
following statements regarding this portion of § 3(r):
"[T]he 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.
[
Footnote 9]
See, e.g., § 6(b) (29 U.S.C. § 206(b)), § 7(a) (29
U.S.C. § 207(a)), and § 11(c) (29 U.S.C. § 211(c)).
[
Footnote 10]
The petitioners' gross commissions amounted to slightly more
than $434,000 and somewhat less than $463,000 in 1967 and 1968,
respectively, the years involved in this litigation.
[
Footnote 11]
The record does not show what proportion of the rentals is
attributable to leases predating D & F's managerial tenure at
each building. When the underlying lease does predate D & F's
contract with the owner, however, the total absence of any
participation by D & F in the lease transaction, of which the
periodic rentals are merely the proceeds, belies any attempt to
attribute these rentals to D & F as an index of its gross
"sales made or business done."
[
Footnote 12]
Part II of the dissent suggests that the "annual gross volume of
sales made or business done" of D & F's enterprise "must
include amounts paid by the building owner to cover operation and
maintenance costs, plus the amount paid as commissions."
Post at
414 U. S. 211.
The dissent's rationale is that D & F was, in effect, paying
the operation and maintenance costs itself and then being
reimbursed by the apartment owners. Such an argument was not made
by the Secretary. Even if such a payment and reimbursement
arrangement would cause the operation and maintenance costs to be
included in measuring "annual gross volume of sales made or
business done" (which we do not decide), it is clear that such an
arrangement did not exist between D & F and the building
owners. The rentals were collected by D & F as the agent for
the owners, and were placed in bank accounts on their behalf. D
& F paid the operation and maintenance costs of the buildings
from the owners' funds pursuant to its agreement with, and on the
authority of, the owners.
[
Footnote 13]
A footnote in the Secretary's brief states that, in addition to
its management services, D & F also sells insurance and real
estate. These operations might bring D & F's "annual gross
volume of sales made or business done" to more than $500,000 for
the years in question if the insurance, real estate sales, and real
estate management operations of D & F's business are "related
activities" for enterprise coverage purposes under § 3(r) of the
Act. We leave for the District Court the consideration of the
Secretary's contention.
MR. JUSTICE BRENNAN, with whom MR. JUSTICE DOUGLAS, MR. JUSTICE
WHITE, and MR. JUSTICE MARSHALL join, concurring in part and
dissenting in part.
I concur in the Court's holding that petitioners are "employers"
of the maintenance workers who service the apartment buildings
managed by D & F.
I dissent, however, from the holding that, for the purposes of §
3(s)(1), "the enterprise of D & F is limited to the sale of its
professional management services," and that those services must be
measured by D & F's commissions. The record in this case leaves
no doubt whatever that D & F's enterprise activities resulted
in both the sale of professional management services and rental
space. While the Court acknowledges that sales of rental space are
"sales made or business done" within the meaning of § 3(s)(1),
ante at
414 U. S. 197,
it nevertheless decides that rental sales should not be attributed
to D & F because,
"when a lease is negotiated by D & F, its remuneration is
calculated not from the proceeds derived from that lease, but only
from the rentals collected during its managerial tenure, during
which period it renders
Page 414 U. S. 203
significant and substantial management services beyond its
earlier service in negotiating the lease."
Ante at
414 U. S.
200.
To be sure, D & F's remuneration for renting an apartment
may not be subject to precise calculation at the time of the sale:
compensation for the sale is derived from D & F's percentage of
monthly rent receipts, which includes D & F's compensation for
building operation and maintenance; and conceivably the building
owner might terminate D & F's management contract before the
tenant makes all the monthly payments required under the lease,
thus reducing D & F's compensation for the sale of the rental
space. It is also true that, after selling the rental space, D
& F performs other significant and substantial management
services. But these rather unsurprising observations hardly supply
a basis for the Court's conclusion that
"It is clear, therefore, that the business of the D & F
enterprise is not the sale of a product (the rental of realty) but
a sale of professional management services,"
and that such services must be measured by commissions. Neither
the facts in this case nor the plain words of § 3(s)(1) and the
uncommonly unambiguous legislative history of that section support
the Court's conclusion that Congress meant to measure one
particular enterprise activity to the exclusion of others.
I
Section 3(s)(1) limits coverage under the Act to those
enterprises "whose annual gross volume of sales made or business
done is not less than $500,000." [
Footnote 2/1] 29 U.S.C.
Page 414 U. S. 204
§ 203(s)(1). The term "sales" employed in § 3(s)(1) is defined
with specificity in § 3(k) of the Act, 29 U.S.C. § 203(k), to mean
"
any sale, exchange, contract to sell, consignment for
sale, shipment for sale, or other disposition" (emphasis added).
Those are simple and entirely unambiguous words that do not even
remotely imply that only some "sales made or business done" should
be measured. Clearly, § 3(s)(1), in terms, embraces the gross
volume of apartment leases sold by D & F, as well as the
professional management services sold by D & F to building
owners. [
Footnote 2/2]
In addition, even were the wording of § 3(s)(1) less clear,
"[t]his is not a case where perforce we must attempt to resolve
a controversy as to the true meaning of equivocal statutory
language unaided by any reliable extrinsic guide to legislative
intention,"
Mitchell v. Kentucky Finance Co., 359 U.
S. 290,
359 U. S. 293
(1959). Senate and House Reports concerning the 1961 and 1966
"enterprise amendments" to the Act show explicitly that
Congress
Page 414 U. S. 205
intended enterprise activities to be measured by
all
"sales made or business done." [
Footnote 2/3]
Prior to 1961, the protections of the Act were extended only to
employees who were themselves "engaged in commerce or in the
production of goods for commerce," §§ 6(a), 7(a), 29 U.S.C. §§
206(a), 207(a). With the enterprise amendments of 1961, Congress
substantially broadened the coverage of the Act to include all
employees "employed in an enterprise engaged in commerce," 75 Stat.
67, 69. But not every enterprise meeting the statutory definition
in § 3(r) of the Act was brought within the Act's coverage. Section
3(s)(1) prescribed a dollar volume test that limited the Act's
coverage to those enterprises that had an "annual gross volume of
sales of . . . not less than $1,000,000,"
id. at 66. The
Senate and House Reports show that the dollar volume test was
adopted to establish an economic standard that predicates coverage
of the Act upon the size of the enterprise and its impact upon
commerce.
See H.R.Rep. No. 75, 87th Cong., 1st Sess., 3,
7, 13 (1961); S.Rep. No. 145, 87th Cong., 1st Sess., 6-7, 31
(1961);
see also the Staff Report of Labor Subcommittee
offered on the floor by Senator McNamara, 107 Cong.Rec. 5840-5842
(1961).
To insure that the term "sales" would not be given a narrow or
technical interpretation that might exclude some enterprises that
have the requisite dollar volume
Page 414 U. S. 206
of business, but that do not make typical commodity sales,
[
Footnote 2/4] Congress amended the
enterprise provisions of the Act in 1966, 80 Stat. 831, by
substituting the wording "annual gross volume of sales made
or
business done" (emphasis added), for "annual gross volume of
sales," the term employed in the 1961 amendments. The Senate Report
fully explains Congress' reasons for changing the terminology:
"This test . . . is intended to
measure the size of an
enterprise for purposes of enterprise coverage
in
terms of the annual gross volume in dollars (exclusive of
specified taxes)
of the business transactions which result from
activities of the enterprise, regardless of whether such
transactions are 'sales' in a technical sense."
". . . The addition of the term 'business done' to the statutory
language should make this intent abundantly plain for the future,
and remove any possible reason for misapprehension. The annual
gross volume of sales made or business done by an enterprise,
within the meaning of section 3(s), will thus continue [under the
1966 Amendments] to include both the gross dollar volume of the
sales (as defined in sec. 3(k)) which it makes, as measured by the
price paid by the purchaser for the property or services sold to
him (exclusive of any excise taxes at the retail level which are
separately stated), and the gross dollar volume of any other
Page 414 U. S. 207
business activity in which the enterprise engages which can be
similarly measured on a dollar basis.
This would include,
for example,
such activity by an enterprise as making loans or
renting or leasing property of any kind."
S.Rep. No. 1487, 89th Cong., 2d Sess., 7-8 (1966). (Emphasis
added.) Congressional intent, with respect to the dollar volume
test in § 3(s)(1), could not be more clear: "the business
transactions which result from activities of the enterprise" are to
be measured. No transactions are excepted from measurement. Nothing
in the legislative history suggests that, when remuneration for
essentially different transactions is in some way commingled, or
when an enterprise engages in closely related activities, only
those transactions constituting the essence of enterprise should be
measured. For the purposes of § 3(s)(1), the only relevant inquiry
is what activities the enterprise engages in, and what sales or
business transactions result from those activities. Measurement of
the dollar volume of those transactions indicates the size of the
enterprise and its impact upon commerce.
Turning to the facts in this case, it is clear from the
stipulated record in the District Court that D & F engages in
essentially two distinct, though related, activities. First, D
& F rents apartments to the public. In this connection, D &
F employs a staff of sales personnel who advertise available
apartments, interview prospective tenants, and negotiate and renew
leases on behalf of the apartment building owner. Second, D & F
operates and maintains apartment buildings. By contract with the
building owner, D & F agrees to collect rent; initiate,
prosecute, and settle all legal proceedings for eviction,
possession of the premises, and unpaid rent; make repairs and
alterations; negotiate contracts for utilities and other necessary
services; purchase supplies;
Page 414 U. S. 208
pay all bills, including mortgage payments; prepare an operating
budget for the building owner's review and approval; submit
periodic reports to the owner; and hire, discharge, and supervise
all labor and employees required for the operation and maintenance
of the premises. Thus, D & F performs both brokerage and
management activities. Indeed, the first article of every contract
entered into by D & F and a building owner states: "Owners
hereby employ and appoint [D & F] as the sole and exclusive
renting and management agent. . . ." (Emphasis added.)
The business transactions resulting from these activities are
quite distinct, and subject to separate measurement. D & F's
brokerage activities result in the sale of rental space to
the public. D & F's
management activities result in a
business transaction between D & F and the building owner,
i.e., D & F's sale of professional management
services.
The Court, however, focuses upon D & F's management
activities, and measures only the resulting transaction between D
& F and the building owners. To be sure, these transactions
have an impact upon commerce, and must therefore be measured under
the dollar volume test. As a result of these transactions, D &
F hires and supervises more than 100 persons who perform all the
functions necessary for the efficient operation and maintenance of
apartment buildings, and thus engages in activities which clearly
induce a flow of men, money, and materials across state lines. But,
as significant as this impact upon commerce may be, it pales by
comparison to the impact caused by D & F's brokerage
activities. To sell apartments, D & F employs a special staff
of personnel whose duties include developing marketing strategies,
placing advertisements in various media, interviewing prospective
tenants, and negotiating
Page 414 U. S. 209
leases. These activities generate a flow of millions of dollars
per year in gross rent receipts, with consequent impacts upon
commerce too numerous and obvious to trace here. The significant
impact of D & F's brokerage activities upon commerce is not
diminished by the fact that the apartment buildings are owned by
others. It is D & F's brokerage activities -- not the building
owners' -- that result in the sale of rental space. In this
respect, D & F, as a broker selling rental space owned by
others, is indistinguishable from the salesman of consignment
goods, whose "sales made or business done," the Court concedes,
ante at
414 U. S. 199,
must be measured by the gross receipts from sales of the
product.
Ignoring D & F's brokerage activities and their resulting
transactions, therefore, not only contradicts Congress' clearly
expressed intention that transactions resulting from
any
activity of the enterprise be measured, but also undermines the
effectiveness of the dollar volume test as a measure of an
enterprise's size and impact upon commerce. [
Footnote 2/5] "Where both the words of a statute and its
legislative history clearly indicate the purpose of Congress, it
should be respected,"
Schwegmann
Page 414 U. S. 210
Bros. v. Calvert Distillers Corp., 341 U.
S. 384,
341 U. S. 402
(1951) (Frankfurter, J., dissenting).
II
Even proceeding on the Court's erroneous basic premise, however,
D & F's sales of professional management services exceed
$500,000 when computed, as Congress required, under the specific
regulations promulgated by the Wage and Hour Division of the
Department of Labor to effectuate § 3(s)(1). [
Footnote 2/6] As a guide to making computations under §
3(s)(1), Congress instructed that:
"The method of calculating the requisite dollar volume of sales
or business [for enterprise coverage purposes] will be the same as
is now followed under the law with respect to calculating the
annual dollar volume of sales in retail and service establishments,
and in laundries under the exemptions provided in section 13(a)(2),
(3), (4), and (13) of the act. The procedure for making the
calculation is set forth in the Department's Interpretative
Bulletin [pertaining to retailers of goods and services]. As it is
there stated, the 'annual dollar volume of sales' consists of the
gross receipts from all types of sales during a 12-month
period."
S.Rep. No. 145, 87th Cong., 1st Sess., 38 (1961). (Emphasis
added.) This "gross receipts" method of computation is presently
embodied in regulations which state:
"The annual gross dollar volume of sales made or business done
of an enterprise or establishment consists of the
gross
receipts from all of its sales or its volume of business done
during a 12-month
Page 414 U. S. 211
period,"
29 CFR § 779.265. (Emphasis added.)
See also 29 CFR §§
779.259, 779.266-779.269.
Gross receipts from "sales" of professional services are not
necessarily limited to commissions. True, if the "sale" is only of
the personal labor of the seller, commissions may well be the sole
measure of "sales made or business done," because commissions are
the seller's only gross receipts. And where, in addition to his own
labor, the seller of professional services provides, for a
commission, personnel and materials as an integral part of the
professional services rendered, the commission still constitutes
the gross receipts for the sale of services. If, on the other hand,
the purchaser of the professional services reimburses the seller
for the costs of men and material and also pays a commission,
plainly "gross receipts" under the statute and regulation are the
reimbursement plus the commission.
D & F was compensated for its professional management
services on a cost plus commission basis. It employed maintenance
workers and purchased materials necessary for the operation and
maintenance of the apartment buildings. By contract, the building
owner agreed to reimburse D & F for these operation and
maintenance costs, [
Footnote 2/7]
and, in addition, to pay D & F a commission. [
Footnote 2/8] Thus, D & F's gross receipts must
include amounts paid by the building owner to cover operation and
maintenance costs, plus the amount paid as commissions.
[
Footnote 2/1]
Section 3(r) of the Act, 29 U.S.C. § 203(r), defines
"enterprise" to mean:
"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 including departments of an
establishment operated through leasing arrangements, but shall not
include the related activities performed for such enterprise by an
independent contractor . . . ."
The dollar volume test of § 3(s)(1) of the Act, 29 U.S.C. §
203(s)(1), limits coverage during the period February 1, 1967,
through January 31, 1969, to those enterprises
"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). . . ."
On February 1, 1969, the dollar volume test was reduced to
$250,000. It is not disputed that, each year since February l,
1969, petitioners have met the dollar volume requirement of the
Act.
[
Footnote 2/2]
In addition to the Court of Appeals below, the Courts of Appeals
for the Fifth and Tenth Circuits have held that the leasing of
rental property constitutes a "sale" within the meaning of the
enterprise provisions of the Act.
See Wirtz v. Savannah Bank
& Trust Co., 362 F.2d 857 (CA5 1966);
Wirtz v. First
National Bank & Trust Co., 365 F.2d 641 (CA10 1966).
[
Footnote 2/3]
A continuance of the judicial practice of liberal interpretation
of the Act was clearly contemplated by Congress:
"In keeping with the broad statutory definitions of the coverage
phrases used, the courts have repeatedly expressed and adhered to
the principle that the coverage phrases should receive a liberal
interpretation, consonant with the definitions, with the purpose of
the Act, and with its character as remedial and humanitarian
legislation."
H.R. Rep. No. 1366, 89th Cong., 2d Sess., 10 (accompanying the
1966 amendments to the Act).
[
Footnote 2/4]
Questions concerning the scope of the term "sales" in the dollar
volume provision of the 1961 enterprise amendments had arisen in
suits brought by the Secretary of Labor to enforce the Act. For
example, in
Wirtz v. Savannah Bank & Trust Co., supra,
the defendant bank contended
"that the term 'sales' must be given a 'literal interpretation,'
and . . . would not include rental receipts, interest on loans and
securities or income from services."
362 F.2d at 862-863 (footnote omitted).
[
Footnote 2/5]
An enterprise's dollar volume of "sales made or business done"
is measured by its "gross receipts,"
see 414 U. S. infra. The record indicates
that D & F collected gross rent receipts of $7,752,600.86 in
1967 and $8,607,086.04 in 1968. That portion of the gross rent
receipts attributable to D & F's sales of rental space
constitutes the proper dollar volume measure of D & F's
brokerage activities. As discussed in Part II,
infra, D
& F's "gross receipts" for its management activities must be
measured by the commissions D & F receives for such services
plus any reimbursements D & F receives for the cost of men and
materials. Since D & F is paid a single commission for both its
brokerage and management activities, that portion representing
compensation for its sale of rental space must be subtracted from
the total commission in order accurately to measure that portion of
the commission attributable to its professional management
services.
[
Footnote 2/6]
Section 602 of Pub.L. 89-601, 80 Stat. 844, provides that the
Secretary of Labor is "authorized to promulgate necessary rules,
regulations, or orders with regard to the [1966 enterprise]
amendments made by this Act."
[
Footnote 2/7]
The apartment building owners never actually sent funds to D
& F to cover its costs and commissions. Rather, these sums were
deducted by D & F from the total receipts it collected from the
tenants of each apartment building.
[
Footnote 2/8]
D & F's commissions are either 4% or 6% of gross rent
receipts, depending upon the extent of the services it agrees to
render.