Falk v. Brennan 8212 844
| Citation | 38 L.Ed.2d 406,94 S.Ct. 427,414 U.S. 190 |
| Decision Date | 05 December 1973 |
| Docket Number | No. 72,72 |
| Parties | E. E. FALK, Individually and as partner in Drucker & Falk, et al., Petitioners, v. Peter J. BRENNAN, Secretary of Labor, United States Department of Labor. —844 |
| Court | United States Supreme Court |
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 mimimum 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(e) of the Act. P. 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, 93 S.Ct. 1138, 35 L.Ed.2d 463, the Act does not apply to D & F as its commissions are below the § 3(s)(1) limitation. Pp. 195—201.
Herbert V. Kelly, Newport News, Va., for petitioners.
Andrew L. Frey, Washington, D.C., for respondent.
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, 52 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.1 The petitioners' defense was that they are not 'employers'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 com- bined activities do not constitute an 'enterprise,' as that term is defined in § 3(r), 29 U.S.C. § 203(r). Second, the petitioners argue, 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 $500,000.3
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.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 percentage of the gross rentals collected from each project.5
The rentals collected by D & F are deposited in local bank accounts.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 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.7 Two days later, we held in Brennan v. Arnheim & Neely, Inc., 410 U.S. 512, 93 S.Ct. 1138, 35 L.Ed.2d 463 (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 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, 93 S.Ct. 1419, 35 L.Ed.2d 686.
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.
In Brennan v. Arnheim & Neely, Inc., supra, we held that the integrated operations of a real estate management company satisfied the definition of 'enterprise' 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. 8 Thus, D & F's enterprise in the present 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...
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