Wirtz v. Columbian Mutual Life Insurance Company

• Decision Date: 23 June 1967
• Docket Number: No. 17152.,17152.
• Citation: 380 F.2d 903
• Parties: W. Willard WIRTZ, Secretary of Labor, United States Department of Labor, Plaintiff-Appellee, v. COLUMBIAN MUTUAL LIFE INSURANCE COMPANY, Defendant-Appellant.
• Court: U.S. Court of Appeals — Sixth Circuit

380 F.2d 903 (1967)

W. Willard WIRTZ, Secretary of Labor, United States Department of Labor, Plaintiff-Appellee, v. COLUMBIAN MUTUAL LIFE INSURANCE COMPANY, Defendant-Appellant.

No. 17152.

United States Court of Appeals Sixth Circuit.

June 23, 1967.

Robert L. Green, Memphis, Tenn., for appellant, Neely, Green & Fargarson, Memphis, Tenn., on brief.

Anastasia T. Dunau, Atty., Dept. of Labor, Washington, D. C., for appellee, Charles Donahue, Solicitor of Labor, Bessie Margolin, Associate Solicitor, Robert E. Nagle, Atty., Dept. of Labor, Washington, D. C., Jeter S. Ray, Regional Atty., Dept. of Labor, Nashville, Tenn., on brief.

Before WEICK, Chief Judge, PECK, Circuit Judge, and CECIL, Senior Circuit Judge.

JOHN W. PECK, Circuit Judge.

The Secretary of Labor brought this action pursuant to 29 U.S.C.A. § 217, to restrain appellant, the Columbian Mutual Life Insurance Company, from violating the minimum wage and overtime provisions of the Fair Labor Standards Act, 29 U.S.C.A. §§ 206(b), 207(a) (2) and 215(a) (2), and from failing to maintain records as required by sections 211(c) and 215(a) (5) of Title 29 U.S.C.A. The District Court found that appellant's maintenance and custodial employees who work at the Columbian Mutual Tower Building were covered under the 1961 amendments to the Act, and entered judgment for the Secretary.

Appellant is a mutual life insurance company which occupies as its home office approximately 11% of the available space in the Columbian Mutual Tower Building in Memphis, Tennessee. After acquiring a 99-year lease to the premises, defendant constructed this twenty-one story building for purposes of providing suitable quarters for its insurance business as well as an investment outlet. Building space which appellant does not use is leased to miscellaneous tenants.

Appellant has a contract of employment with an agent, Percy Galbreath & Son, Inc., under which the latter performs certain management services, including leasing the building space to tenants and collecting and transmitting the rents to appellant. This agent, subject to appellant's approval, also hires the maintenance and custodial personnel, which number approximately twenty-one. These employees are paid by appellant and the District Court found that appellant retains, and has exercised, the right to fix the wages paid these employees and to have them removed. In addition, the District Court found that appellant has an equal voice along with its agent in determining the rent charged, approving requisitions for supplies, prescribing rules and regulations for the operation of the building, and in approving alterations in the floor plans. It is admitted that many of the custodial personnel have not been paid the statutory wage under the Act, and it is the coverage of these employees which is in question.

The Secretary claims that these employees are covered by virtue of the "enterprise" provisions which were added to the Act by amendment in 1961. Minimum wage and overtime protection extend to all employees of an establishment of an enterprise if the establishment has two or more employees engaged in commerce or in the production of goods for commerce and if the "annual gross volume of sales of such enterprise" is not less than $1,000,000.

Section 3(r) of the Act (29 U.S.C.A. § 203(r)) provides in part:

"(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, but shall not include the related activities performed for such enterprise by an independent contractor: * * *"

Section 3(s) (3) of the Act provides:

"(s) `Enterprise engaged in commerce or in the production of goods for commerce\' means any of the following in the activities of which employees are so engaged, including employees handling, selling, or otherwise working on goods that have been moved in or produced for commerce by any person:

* * * * * *

"(3) any establishment of any such enterprise, except establishments and enterprises referred to in other paragraphs of this subsection, 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; * * *"

In holding that coverage existed under the "enterprise" provisions of the Act, the District Court necessarily found, first, that the operation of an insurance company and the maintenance of an office building constituted an enterprise within the meaning of section 3(r), in that these were (1) related activities (2) performed through unified operation or common control (3) for a common business purpose; second, that the annual "gross volume of sales" of the enterprise was not less than $1,000,000; and third, that the establishment of the enterprise in which the custodial employees worked had two or more employees engaged in commerce or in the production of goods for commerce. Appellant challenges the District Court's conclusions with respect to each of the three basic questions.

With respect to the first question of whether an enterprise existed within the meaning of section 3(r), appellant concedes that the element of "common control" has been established. It contends, however, that the District Court erred in holding that the operation of an insurance company and the maintenance of an office building were "related activities performed * * * for a common business purpose."

The phrase "related activities" is not defined. Looking to the legislative history of the Act, however, Senate Report No. 145, 87th Cong., 1st Sess., 2 U.S. Code Cong. & Admin.News (1961), p. 1660 hereinafter the "Senate Report" states that activities are related not only when they are "the same or similar" or "part of a vertical structure," but also when "they are auxiliary and service activities such as central office and warehousing activities and bookkeeping, auditing, purchasing, advertising, and other services." After referring to this Report, the District Court ruled that appellant's home office and office building activities were related for the reasons that the building constituted an outlet for investment of appellant's funds and provided appellant with home office space presently and expansion space for the future; and that appellant used the building to indicate its solidarity to the public by use of a picture of the building on its stationery and other advertising material, and by calling it the Columbian Mutual Tower Building. Moreover, the maintenance employees provide the same general services to appellant as they did to the building's other miscellaneous tenants.

In support of its position that the activities were not related, appellant relied primarily on two district court cases "involving the same factual issues as presented in this case," Wirtz v. Savannah Bank & Trust Co., 247 F.Supp. 547 (S.D.Ga.1964), and Wirtz v. First Nat'l Bank & Trust Co., 239 F.Supp. 613 (W.D.Okla.1965), both of which held that banking activities were not related to the maintenance and renting of an office building which the Bank owned and partially occupied. Both cases, however, had been reversed at the time of oral argument in this court. Said the Court of Appeals for the Fifth Circuit:

"The Secretary asserts that `the management of the bank building as an integral part of defendant\'s banking operations clearly serves the essential "auxiliary and service" function of providing the Bank with the premises for conducting its present business, as well as space in which to expand in the future.\' We agree. The operation of the office building cannot be divorced from that of the Bank * * *. Several * * * connecting factors between the Bank and the office building would not be present if the two operations were physically separated into two buildings located at some distance from each other. Thus, an office building owned by the Bank on the other side of the city or in another city would not serve the functions of spreading the cost of real estate upon which the Bank is built or of providing room for Bank expansion. Nor would the two separate buildings be likely to evoke the public image created by a large bank-office complex. The arguments pressed by the appellee seem to treat the Bank and the office building as if the two operations were completely separated in this manner and to ignore the ramifications of their physical connection." Wirtz v. Savannah Bank & Trust Co., 5 Cir., 362 F.2d 857, 860-861 (1966), reversing 247 F.Supp. 547, supra.

Since this sound reasoning is equally applicable here, the District Court did not err in deciding that the home office and office building activities were related within the meaning of section 3(r). See also Wirtz v. First Nat'l Bank & Trust Co., 365 F.2d 641 (10th Cir. 1966), reversing 239 F.Supp. 613, supra.

The District Court also correctly concluded that the closely related requirement of the enterprise concept, that the related activities be performed "for a common business purpose," was satisfied in the instant case. While a company's nonprofit activities do not fall within the "common business" requirement, it is settled that a profit motive alone will not justify the conclusion that related activities are performed for a common business purpose. However, the considerations previously discussed are pertinent to this issue, and since it is readily apparent that appellant's ownership and maintenance of the office building does further its insurance business, both from the standpoint of facilitating the internal operation of the business and from the standpoint of establishing a favorable public image, the home office and office building activities are performed "for a common...