Wirtz v. Columbian Mutual Life Insurance Company

Decision Date02 October 1965
Docket NumberCiv. No. 4955.
Citation246 F. Supp. 198
PartiesW. Willard WIRTZ, Secretary of Labor, United States Department of Labor, Plaintiff, v. COLUMBIAN MUTUAL LIFE INSURANCE COMPANY, a Corporation, Defendant.
CourtU.S. District Court — Western District of Tennessee

Charles Donahue, Solicitor, James B. Leist, Washington, D. C., Counsel for Regional Litigation, Jeter S. Ray, Regional Atty., David V. Manker, Deputy Regional Atty., Bobbye D. Spears, Nashville, Tenn., for plaintiff.

Neely, Green & Fargarson, Memphis, Tenn., for defendant.

BAILEY BROWN, District Judge.

This is an action by the Secretary of Labor under Sec. 17 of the Fair Labor Standards Act of 1938, as amended (29 U.S.C.A. § 217) to enjoin the defendant, Columbian Mutual Life Insurance Co., from failing to pay and from withholding the payment of minimum wage and overtime compensation required by Secs. 6(b), 7(a) (2) and 15(a) (2) of the Act (29 U.S.C.A. §§ 206(b), 207(a) (2) and 215(a) (2)) and from failing to maintain the records required by Secs. 11(c) and 15(a) (5) of the Act (29 U.S.C.A. §§ 211(c) and 215(a) (5)). This action was tried without the intervention of a jury. The broad question presented is whether the service and custodial employees of a 21-story office building owned by the defendant insurance company, which is occupied in part by its home office, are covered employees by virtue of 1961 amendments to the Act. It is conceded by defendant that minimum wage and overtime compensation has not been paid to these building employees and that the records prescribed by the Act have not been maintained with respect to these employees.

Prior to the 1961 amendments, coverage of an employee by the Act depended upon his own relation to interstate commerce, that is to say, an employee was not covered unless he was "engaged in commerce or in the production of goods for commerce." Secs. 6(a) and 7(a) (29 U.S.C.A. §§ 206(a) and 207(a)) The 1961 amendments (enacted September 3, 1961) broaden the coverage to include certain employees who are themselves not engaged in commerce or in the production of goods for commerce; and the minimum wage and overtime requirements are gradually applied to these newly-covered employees. It is upon these provisions that the Secretary relies in asserting coverage.

By Secs. 6(b) and 7(a) (2) of the Act (29 U.S.C.A. §§ 206(b) and 207(a) (2)), this new coverage applies to an employee who in any workweek "* * * is employed in * * * an establishment described in section 3(s) (3) * * *", and who, except for the enactment of the 1961 amendments, would not be a covered employee.

Sec. 3(s) (3) (29 U.S.C.A. § 203(s) (3)) 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; * * *."

Sec. 3(r) of the Act (29 U.S.C.A. § 203(r)), which defines an "enterprise," provides in relevant 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: * * *."

It will be seen that there can be no coverage under Sec. 3(s) (3) unless, among other things, "the annual gross volume of sales of such enterprise is not less than $1,000,000." This requirement raises two questions. The first question is whether the office building and home office activities of the defendant insurance company together constitute an "enterprise" within the meaning of Sec. 3(r). If they do not, there could be no coverage, because the building does not have annual "gross sales," however defined, of $1,000,000. If they do constitute an enterprise, the second question is: what part of the gross receipts of the defendant insurance company from the building and insurance activities constitute "gross sales" within the meaning of Sec. 3(s) (3)? We address ourselves first to the question whether the office building and home office activities constitute an "enterprise."

Under Sec. 3(r), the office building and home office activities constitute an enterprise if (1) they are related activities, and (2) they are performed either through unified operation or common control, and (3) they are performed for a common business purpose.

The "common control" requirement is clearly met here. The defendant insurance corporation owns both the building (actually it has a 99 year lease) and the insurance business. There is only one legal entity. More importantly, while defendant has an agreement with an agent to perform certain management services, defendant retains the right (1) to approve employment of building employees and to have them removed, (2) to fix and pay wages of these employees, (3) to have an equal voice in determining rent charged, (4) to approve leases and tenants, (5) to approve requisitions for supplies, (6) to approve the institution of litigation, (7) to prescribe rules and regulations for operation of the building, and (8) to approve alterations in the floor plans. Moreover, defendant has exercised these rights reserved to it in the agreement with the agent.

The question whether the office building and home office activities are "related" is more difficult, but the legislative history is of some aid. In Senate Report No. 145, U.S.Code Congressional & Administrative News (1961), p. 1660, it is said:

"The bill's approach is to treat as separate enterprises those businesses which are unrelated to each other. For example, if a single company owns several retail apparel stores and is also engaged in the lumbering business, the sales of the lumbering business would not be included in the annual dollar volume in determining whether the $1 million test under section 3(s) (1) has been met. The employees of the lumbering business would not be included in the `enterprise' even if the $1 million test were met since they are not engaged in the `related activities' of the retail stores.
"Within the meaning of this term, activities are `related' when they are the same or similar, such as those of the individual retail or service stores in a chain, or departments of an establishment operated through leasing arrangements. They are also `related' when they are auxiliary and service activities such as central office and warehousing activities and bookkeeping, auditing, purchasing, advertising, and other services. Likewise, activities are `related' when they are part of a vertical structure such as the manufacturing, warehousing, and retailing of a particular product or products under unified operation or common control for a common business purpose."

We believe that the home office and office building activities are related within the meaning of Sec. 3(r) of the Act. The home office occupies about 11% of the space in the building and the remainder of the building is occupied by miscellaneous tenants. Ownership of the building therefore constitutes an outlet for investment of defendant's funds and also provides defendant with home office space. Defendant uses its ownership of the building to indicate to the public that it is a solid insurance company by using a picture of the building on its stationery and by calling the building the "Columbian Mutual Tower Building." Some of the employees of the building — superintendent, night superintendent, porters, and elevator operators — provide the same general services for defendant's home office as they do for the tenants. One of the building maids cleans the defendant's home office space. One of the building porters frequently picks up the home office mail at the post office on Saturdays, Sundays and holidays. The building maintains a law library for its lawyer tenants and a telephone switchboard and answering service for tenants who desire and pay for this service. One female employee acts as librarian and switchboard operator, and she is relieved by home office employees each day for about two hours for lunch, coffee breaks and other purposes. While the rights reserved to defendant in its agreement with the management agent are generally exercised by defendant's building superintendent, he confers with defendant's president from time to time in exercising these rights. We would agree that if the defendant owned an office building which it did not in part occupy, or even if it did in part occupy the building, and if the connecting factors present here were absent, the operation of the building to the extent that it was not occupied by defendant might well be an unrelated activity. But here we have connecting factors which compel the conclusion that the activities are related.

In contending that these activities are not related, defendant relies on Wirtz v. Savannah Bank & Trust Co., 16 W H Cases 728, 51 L C § 31, 661 (S.D.Ga. 1964). This case is distinguishable at least on the ground that there the duties of the building employees were limited to the portions of the building leased to tenants. Defendant also relies in this connection on Wirtz v. First National Bank & Trust Co., 239 F.Supp. 613 (W.D.Okl.1965). In this case, it does not appear that there was as close a connection between the operation of the buildings and the operation of the bank as there is in ...

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