Court: Supreme Court of the United States; April 16, 1973; Federal Supreme Court; Federal Appellate Court
Mr. Justice Stewart delivered the Court's opinion in a case initiated by the Secretary of Labor against a real estate management company for violations of the Fair Labor Standards Act (FLSA). The Secretary sought an injunction to prevent future violations regarding minimum wage, overtime, and recordkeeping, along with back wages for affected employees. Under the FLSA, employees are entitled to minimum wage and maximum hours if engaged in an enterprise involved in commerce. The company managed several commercial and residential properties in Pittsburgh, operating under management contracts rather than owning the properties. Its responsibilities included tenant recruitment, lease negotiations, legal actions related to leases, and property maintenance. The company also managed payroll and employment for building staff, set work hours, negotiated pay, and conducted collective bargaining for unionized employees.
The District Court ruled that the maintenance and operational workers were 'employees' and the company qualified as an 'employer' under the FLSA. It determined that gross rentals, not commissions, were the appropriate measure of 'annual gross volume of sales' for the statutory definition of an 'enterprise engaged in commerce.' Although the court found insufficient engagement in commerce prior to the 1966 amendments, it concluded that the company’s activities across the nine properties constituted a related 'enterprise' under the FLSA.
On appeal, the Third Circuit Court affirmed the District Court's conclusions regarding the company’s status as an employer and the use of gross rentals for measuring 'gross sales.' However, it disagreed with the aggregation of gross rentals across properties, stating that a common business purpose must be demonstrated for separate establishments to be considered a single enterprise. The appeal highlighted that if the company’s agency role resulted in significant changes to the owners' independent business purposes, such as pooling profits, a different outcome might occur.
The owners only share the common decision to hire the Company as their rental or management agent, which does not satisfy the 'enterprise' requirement under the Act. The Court of Appeals reversed and remanded for proof of individual gross rentals, without addressing the respondent's pre-1967 commerce engagement. The Supreme Court granted certiorari to resolve whether the respondent's management activities across buildings constitute a single 'enterprise' per the Act. Significant issues regarding the respondent's status as an 'employer' and the measure of 'gross sales' are not under consideration due to the absence of a cross-petition. The Fair Labor Standards Act's definition of 'enterprise' was expanded in 1961 to include employees in enterprises engaged in commerce, with specific dollar volume thresholds for coverage. The Act defines 'enterprise' as related activities performed for a common business purpose, which excludes certain arrangements like exclusive dealerships. The District Court identified the three elements of 'enterprise': related activities, unified operation or common control, and common business purpose. The Court of Appeals' conclusion that the respondent's management activities do not meet these criteria was deemed erroneous. Recognizing the respondent as the employer of all building employees indicates it is a single enterprise under the Act, as its operations across buildings are virtually identical and interconnected, meeting the intended definition of 'related' activities as outlined in the Senate report on the 1961 amendments. The respondent operates with unified control from a central office across all nine buildings.
To determine if the respondent qualifies as an 'enterprise' under the Act, the nature of the relationship between the respondent and the building owners, including agency status, separate bank accounts, and ownership of risks and gains, is deemed irrelevant. The statutory definition requires that the respondent’s activities be interconnected and under unified control, which they are. The Court of Appeals emphasized that the lack of relationship and common purpose among the building owners is not pertinent, as they are not defendants in the case. The focus is on the respondent's activities, which are unified by the common business purpose of managing commercial properties for profit.
The Court noted that the separateness of the buildings does not affect their classification under section 3(r). Additionally, the Senate report clarifies that small, independent businesses are not considered part of a larger enterprise solely due to business dealings with larger entities, such as franchises or group purchasing arrangements. The Court highlighted that the building owners should not be included under the Act simply because they engage a large management company, as the case concerns the management company as an employer of the relevant employees.
Concerns regarding the dollar volume limitations in the 3(s) definition of 'enterprise engaged in commerce' were addressed, with the Court of Appeals noting legislative intent to exempt small businesses from the Act's obligations. The argument against aggregating the individual building owners into a single enterprise due to their dealings with a management company was countered by reiterating that the management company is the recognized employer in this context, not the individual owners.
The measure of the respondent's size is determined by the gross rentals from properties it manages, affirming that it does not qualify as a small business under the statutory definition of 'enterprise.' The respondent's argument challenging the 'employer' and 'gross sales' findings is deemed a collateral attack, which cannot be made without a cross-petition for certiorari. The District Court's decision to treat all management activities as a single 'enterprise' is upheld, leading to the reversal of the Court of Appeals' judgment and remanding the case for further proceedings.
The relevant statute defines 'Enterprise engaged in commerce or in the production of goods for commerce' and outlines specific gross volume thresholds for coverage, which vary over the years. The District Court initially required two employees engaged in commerce within each building for coverage; however, following the 1966 amendments, only one employee is needed for the entire enterprise to qualify. The District Court found that the respondent met this requirement, with annual gross rental income exceeding $1,000,000 during the relevant years.
The statutory definition of 'employer' is broad, allowing for multiple simultaneous 'employers.' Notably, the decision does not collectively recognize the buildings and management company as a single enterprise, focusing solely on the management company and its activities. The Supreme Court has granted certiorari to consider the appropriate measure of 'gross sales' and the status of maintenance employees as 'employees' within the context of the Act.
