Wirtz v. Savannah Bank & Trust Company of Savannah

• Decision Date: 27 June 1966
• Docket Number: No. 22356.,22356.
• Citation: 362 F.2d 857
• Parties: W. Willard WIRTZ, Secretary of Labor, United States Department of Labor, Appellant, v. SAVANNAH BANK & TRUST COMPANY OF SAVANNAH, Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

362 F.2d 857 (1966)

W. Willard WIRTZ, Secretary of Labor, United States Department of Labor, Appellant, v. SAVANNAH BANK & TRUST COMPANY OF SAVANNAH, Appellee.

No. 22356.

United States Court of Appeals Fifth Circuit.

June 27, 1966.

Bessie Margolin, Associate Sol., Charles Donahue, Sol., Dept. of Labor, Robert E. Nagle, Anastasia T. Dunau, Attys., Dept. of Labor, Washington, D. C., Beverley R. Worrell, Regional Atty., for appellant.

James P. Houlihan, Jr., Savannah, Ga., Connerat, Dunn, Hunter, Houlihan & Maclean, Savannah, Ga., for appellee.

Before TUTTLE, Chief Judge, THORNBERRY, Circuit Judge, and LYNNE, District Judge.

THORNBERRY, Circuit Judge:

The state-chartered Savannah Bank & Trust Company of Savannah, Georgia, owns a fifteen story building located in Savannah — the first four floors (22%) are occupied by the Bank, and the remaining eleven floors (78%) are rented to various tenants. The dispute here involves the asserted coverage, under the minimum wage provisions of the Fair Labor Standards Act, 29 U.S.C. § 201 et seq., of the Bank employees whose duties are limited to the portion of the building leased to tenants.¹

The Bank admits that the employees engaged in its banking operations are subject to the Act and are paid in accordance with the minimum wage provisions. These include maintenance employees whose duties relate to space occupied by the Bank. The Bank, however, denies that the employees whose duties are restricted to the rental office portion of the building are covered by the Act. As a result, the elevator starter and the maids employed to clean the tenant floors are paid less than the minimum wage; while the maids for the Bank floors, the watchmen and the maintenance men are paid in accordance with the Act.

The Secretary of Labor does not contend that the employees working on the leased floors were covered by the minimum wage provisions prior to 1961, but he asserts that the 1961 Amendments to the Act which added the "enterprise" provisions extended coverage to them. Essentially these provisions require the payment of the minimum wage to any employee who "is employed in an enterprise engaged in commerce or in the production of goods for commerce, * * * by an establishment described in section 203(s) (3) or (5) of this title." 29 U.S.C. § 206 (b). The following definitions are relevant in applying this provision:

203(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: * * *

203(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; * * *

I. Definition of "Enterprise"

The statutory definition of "enterprise" requires the existence of three elements: (1) related activities, (2) unified operation or common control, and (3) a common business purpose. The Bank admits the presence of the second element, common control, but denies the existence of the other elements. To determine whether there is related activity "performed * * * for a common business purpose," we must first examine the relationship of the operation of the Bank and the office building.

A senior Bank official directs the operation and maintenance of the entire building. Rental rates are established by the finance committee of the Bank, and rent receipts are handled by the trust department. Rental income, depreciation, building repairs and taxes attributable to the office portion of the building are included in the Bank's income tax return. The Bank does not pay rent for the space it occupies. The maintenance crew consists of fifteen maids (one for each floor), a supervisor of maids, maintenance men, an elevator starter and watchmen. All these employees, except the four maids assigned to clean the Bank floors, are carried on a separate payroll. Only the office building maids and the elevator starter, however, are paid less than the minimum wage. From these facts it is clear that the Bank and the office building are operated as a single unit, with the exception of the separate payroll for the office building employees. Common control, as conceded by the Bank, is obviously present.

The legislative history provides some assistance in ascertaining the meaning of "related activities performed * * * for a common business purpose." The Report of the Senate Committee on Labor and Public Welfare² states that the "enterprise" provisions are designed to extend coverage to all employees of any establishment (with certain exceptions)

"which now has some employees who are and others who are not individually engaged in commerce, or in the production of goods for commerce, if the establishment is in an enterprise which has an annual gross volume of sales of not less than $1 million. * * * The purpose of this provision is to eliminate fragmentation of coverage in the establishments of these large enterprises and prevent continuance of a situation in which some of the employees in such an establishment have the protection of the act while others who work side by side with them do not * * *.

* * * * * *

"Related activities conducted by separate business entities will be considered a part of the same enterprise where they are joined either through unified operation or common control into a unified business system or economic unit to serve a common business purpose.

"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(a) (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."

(Emphasis added). See also H.R.Rep. No. 75, 87th Cong., 1st Sess. 7-8 hereinafter cited as H.R.Rep.

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, as contended by the appellee. The appellee admits that the primary purpose of constructing a building with space far in excess of the actual needs of the banking operation is to spread the very high cost of real estate in the downtown area. Thus, the revenue-producing capacity of the office space in the Bank building is necessary to enable the Bank to occupy its present location. In addition to providing space for future expansion, the building stands as a symbol in the public mind of the stability and the position of the Bank in the community. As candidly revealed by appellee, there are also certain tax advantages to the Bank which result from the ownership of real estate under state law. Thus, there is a very real relationship between the operation of the office building and the Bank sufficient to satisfy the statutory requirement. See Wirtz v. Columbian Mutual Ins. Co., W.D. Tenn. 1965, 246 F.Supp. 198, 201-02.

Several of these 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 the 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.^2a

Many of the same considerations discussed above are also relevant in determining the existence of "common business purpose." The reference to this term in the legislative history is brief:

"In order for `related activities\' to be part of an enterprise they must be performed for a `common business purpose.\'

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