Brennan v. Arnheim and Neely, Inc 8212 1598

• Decision Date: 28 February 1973
• Docket Number: No. 71,71
• Parties: Peter J. BRENNAN, Secretary of Labor, Petitioner, v. ARNHEIM AND NEELY, INC., et al. —1598
• Court: U.S. Supreme Court

410 U.S. 512

93 S.Ct. 1138

35 L.Ed.2d 463

Peter J. BRENNAN, Secretary of Labor, Petitioner,

v ARNHEIM AND NEELY, INC., et al.

No. 71—1598.

Argued Jan. 16, 1973.

Decided Feb. 28, 1973.

Rehearing Denied Apr. 16, 1973.

See 411 U.S. 940, 93 S.Ct. 1888.

Syllabus

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 wages 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. 516—521.

3 Cir., 444 F.2d 609, reversed and remanded.

Andrew L. Frey, Washington, D.C., for petitioner.

Eugene B. Strassburger, Jr., Pittsburgh, Pa., for the respondent Arnheim and Neely, Inc.

Frank L. Seamans, Pittsburgh, Pa., for the respondent Institute of Real Estate Management.

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 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. D.C., 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 990—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 staturory definition of an 'enterprise engaged in commerce.' Id., at 993 994.¹ Though it rejected the claim that the respondent was sufficiently engaged in commerce for its employees to be covered for the time before the 1966 amendments to the Act went into effect,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 f § 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 enter- prise, 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, 93 S.Ct. 56, 34 L.Ed.2d 79, 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.³

The concept of 'enterprise' under the Fair Labor Standards Act came into being with the 1961 amendments, which substantially broadened the coverage of 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.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 cutoff 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 commercial landlords do not create 'enterprises' whthin 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; U.S.Cope Congressional & Admin.News, 1961, p. 1660. 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...