Brennan v. Plaza Shoe Store, Inc.

Decision Date19 August 1975
Docket NumberNo. 74-1813,74-1813
Citation522 F.2d 843
Parties22 Wage & Hour Cas. (BN 441, 77 Lab.Cas. P 33,283 Peter J. BRENNAN, Secretary of Labor, United States Department of Labor, Appellant, v. PLAZA SHOE STORE, INC., et al., Appellees.
CourtU.S. Court of Appeals — Eighth Circuit

Donald S. Shire, Deputy Associate Sol., Dept. of Labor, Washington, D. C., for appellant.

J. Douglas Cassity, Springfield, Mo., for appellees.

Before CLARK, * Associate Justice, Retired, and LAY and BRIGHT, Circuit Judges.

BRIGHT, Circuit Judge.

The Secretary of Labor appeals from the district court's determination that two dress shops do not constitute an "enterprise" with two shoe stores, thus denying employees of the dress shops the benefits of minimum wage and overtime compensation under provisions of the Fair Labor Standards Act of 1938, as amended, 29 U.S.C. §§ 201 Et seq. (1970). The district court found that the activities of the dress shops and shoe stores were unrelated and were not performed for a common business purpose. Therefore, the court concluded that the businesses were separate for purposes of the Fair Labor Standards Act (hereinafter cited as Act), although each was owned by various members of the same Springfield, Missouri, family. 1

The parties stipulated that the two shoe stores constituted an enterprise under the Act and that the two dress shops also constituted a separate enterprise under § 3(r) of the Act, 29 U.S.C. § 203(r), but that the dress shops' combined annual volume of business was less than the $250,000 minimum required by § 3(s)(1). 29 U.S.C. § 203(s)(1). Thus, the principal question presented at the trial and on appeal is whether the dress shops or either of them must be considered as part of the same enterprise with the shoe stores during the period here in question I. e., since November 1, 1969. The district court answered this question negatively and dismissed the action as to the dress shops. We disagree in part with the ruling of the district court. In our view, one of the dress shops constituted an enterprise with the shoe stores until August 1973, when it effectively severed its ties with the original shoe store operated by the family. The second dress shop, which is no longer in business, appears to have been owned and operated independently by Sarah Lee, the "modern miss" of the family, so as to fall outside enterprise coverage under the Act.

I.

The facts of this case disclose a not unusual picture of an expanding family business developed by the parents and followed thereafter by a gradual turnover of some of the business interests to the children. Norene Lee, a defendant, and her husband, Oscar, started a retail shoe store in 1952, known as the Plaza Shoe Store. They and their son, Robert, worked together in developing an extensive trade in men's, women's, and children's shoes. Robert, who had worked in the business for some 20 years, was the day-to-day manager of the Plaza Shoe Store during the period in question.

In 1966, Norene Lee, who had been particularly active in promoting the business through personal appearances on radio and television, established a dress shop or boutique in the same building in which the shoe store was located and called this establishment "The Plaza Place" (hereinafter Plaza dress shop). The Plaza dress shop and the shoe store shared a common entrance and the same business address, although each business was visually distinguishable by its decor.

The daughter of Norene and Oscar Lee, Sarah Lee, graduated in January 1969, from Stephens College at Columbia, Missouri, where she had studied fashion design. She subsequently joined the family business and, after a short apprenticeship, became the manager of the Plaza dress shop. Her parents gave Sarah one-third of the stock of this business upon its incorporation in 1969, while retaining the remainder of the stock.

The family business expanded in 1970 to a second location in Springfield at a site known as the Battlefield Mall, located about one mile from the Plaza stores. Norene Lee testified that they decided to open a second shoe store at the Mall in order to retain and protect their exclusive franchises in Springfield of various brands of shoes. The Lees incorporated this second store as "The Plaza Shoe Mall, Inc." (hereinafter Mall shoe store). Two-thirds of the shares of the Mall shoe store were owned by Oscar and Norene Lee; one-third were owned by Robert. Norene Lee undertook general management of this store while she continued to perform some services for the Plaza Shoe Store, including radio and television promotion and joint purchasing of inventory. Contemporaneously with the organization of the Mall shoe store, the Lee family organized a corporation, The Place Mall, Inc. (hereinafter Mall dress shop) to sell women's dresses at the same location. The Mall dress shop and the Mall shoe store, although located within the same four walls, were distinguishable by their decor and by a difference in their floor levels. They shared a common mailing address.

Sarah Lee was given two-thirds of the corporate stock of the Mall dress shop by her parents. Although Oscar and Norene Lee served as officers and directors of all corporations here involved, the record indicates that Sarah operated the Mall dress shop without interference from her parents and separately from the Mall shoe store. Sarah actively managed the Mall dress shop while her mother participated with her in the direction of the Plaza dress shop. Sarah gained a majority ownership in both dress shops by January 1973 when, by gift and purchase from her parents, she acquired 80 percent of the capital stock of the Plaza dress shops. 2

We have noted that each dress shop was located on the same premises as a family-owned shoe store and shared a common entrance and mailing address with the shoe store. The record also showed a number of shared operations and services among the stores at both locations. The four stores shared office facilities above the Plaza dress shop and common employees conducted the bookkeeping services for each; the expenses of this office, including the salaries of the office employees, were allocated among the four businesses. Customer accounts were combined to produce a single billing sent out in the name of the Plaza Shoe Store, Inc. 3

In certain respects the stores operated independently, however. The office personnel maintained separate worksheets, inventory, and bank accounts for each business. The employees of both stores at each location used one time clock, although their salaries were separately paid by the respective stores. Also, the sales employees of each store were hired, trained, and fired separately, and with minor exceptions, their duties were not interchangeable between the shoe stores and dress shops. The four stores used a common delivery dock behind the Plaza stores, but excess inventory for the Plaza shoe store and Plaza dress shop was stored in separate areas. Although the shoe stores and dress shops generally conducted separate advertising programs, the four stores participated in a joint advertisement in the yellow pages of the telephone book.

II.

The question of whether several businesses constitute an " enterprise" is a question to be resolved in each case on the basis of all the particular facts of the case. Here, the parties present a record of largely undisputed facts. Thus, whether these facts establish the existence of an enterprise becomes a question of law and we are not bound by the clearly erroneous rule in testing the validity of the conclusion reached by the district court. See Schultz v. American Can Company-Dixie Products, 424 F.2d 356, 360 n.6 (8th Cir. 1970); Wirtz v. Barnes Grocery Co., 398 F.2d 718, 722 (8th Cir. 1968).

The Fair Labor Standards Act was enacted to provide a minimal standard of living necessary for the health, efficiency, and general well-being of workers and to prescribe certain minimum standards for working conditions. In applying the Act to the facts at hand, we must liberally construe it "to apply to the furthest reaches consistent with congressional direction" in fulfillment of its humanitarian and remedial purposes. Mitchell v. Lublin, McGaughy & Associates, 358 U.S. 207, 211, 79 S.Ct. 260, 264, 3 L.Ed.2d 243 (1959). See also Brennan v. Wilson Building, Inc., 478 F.2d 1090, 1094 (5th Cir.), Cert. denied, 414 U.S. 855, 94 S.Ct. 156, 38 L.Ed.2d 105 (1973); Hodgson v. University Club Tower, Inc., 466 F.2d 745, 746 (10th Cir. 1972).

A congressional amendment introduced the concept of "enterprise" coverage into the Act in 1961. The amendment substantially broadened the coverage of the Act by bringing those workers employed in an enterprise engaged in interstate commerce within the ambit of the minimum wage and maximum hours provisions. Fair Labor Standards Amendments of 1961, Pub.L. No. 87-30, § 2(c), 75 Stat. 65.

The Secretary asserts that the four retail businesses are subject to the provisions of the Act because they constitute an "enterprise" as defined in §§ 3(r) and 3(s)(1) of the Act, 29 U.S.C. §§ 203(r) and (s)(1). The pertinent language of the statutory definition provides as follows:

As used in this Act

(r) "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 including departments of an establishment operated through leasing arrangements * * *. (29 U.S.C. § 203(r).)

(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 or materials that have been moved in or produced for...

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