Opinion ID: 723390
Heading Depth: 1
Heading Rank: 1

Heading: Enterprise Liability

Text: 4 The FLSA minimum wage and overtime provisions apply to employees of an enterprise engaged in interstate commerce. See 29 U.S.C. § 203(r). Before trial, the three corporations and Komoda stipulated that they were an enterprise for purposes of FLSA liability. Despite the stipulation, the district court held that SFG was not part of that enterprise. The court did not specifically point to any facts as the basis for its opinion, but noted that at the time the stipulation was signed, SFG had not yet been named as a party. 5 Whether companies constitute an enterprise is a three-part test. See id.; Martin v. Deiriggi, 985 F.2d 129, 133 (4th Cir.1992). They must (1) perform related activities; (2) under unified operations or common control; (3) for a common business purpose. Id. We review de novo a determination of enterprise liability. Brock v. Hamad, 867 F.2d 804, 806 (4th Cir.1989). 1 We hold that for FLSA purposes, SFG was a part of the nightclub enterprise.
6 Related activities are operation[s] through substantial ownership or control of a number of firms engaged in similar types of business activities. S.Rep. No. 1487, 89th Cong., 2d Sess., 1966 U.S.C.C.A.N. 3002, 3009. Activities are related if they are the same or similar. S.Rep. No. 145, 87th Cong., 1st Sess. 31, 1961 U.S.C.C.A.N. 1620, 1660. Although each corporation offered slightly different entertainment, all three were nightclubs catering to visiting businessmen, serving alcoholic beverages and featuring young Filipinas. See Donovan v. Grim Hotel Co., 747 F.2d 966, 970 (5th Cir.1984) (rejecting argument that hotels did not have related activities where some served short-term guests and others served long-term guests), cert. denied, 471 U.S. 1124 (1985). Moreover, the clubs shared the same barracks, the same rules and regulations, and the same promotion agency, which provided employees only for them. The defendants, including SFG, clearly performed related activities.
7 In determining whether there is common control, courts heavily emphasize common ownership. See, e.g., Reich v. Bay, Inc., 23 F.3d 110, 115 (5th Cir.1994); Grim Hotel, 747 F.2d at 970; Donovan v. Easton Land & Dev., Inc., 723 F.2d 1549, 1552 (11th Cir.1984). Komoda, the owner of Japan Enterprise Corporation's (JEC's) Micronesia Club and previous owner of Ameriana's Happiness Club, is the common link of ownership among the companies. Although Eizo Tambo was the president and majority owner of SFG, Komoda contributed substantially to the funding and organization of the corporation. See 29 C.F.R. § 779.221 ( 'Common' control includes the sharing of control and it is not limited to sole control or complete control by one person or corporation.). Komoda was an SFG director and the secretary/treasurer, described himself as the vice president, and owned 25% of the shares. 8 Other factors also demonstrate that SFG was under common control by the enterprise. Komoda hired SFG's two managers from nightclubs he owned in Japan. He directed the Mayten managers to begin complying with the FLSA as each violation surfaced. See Grim Hotel, 747 F.2d at 970 (two factors are of the utmost significance: whether a common person had the power to hire and fire the manager in each company and whether a common person could approve adherence to the FLSA). When SFG dissolved, Komoda signed the dissolution papers. See Easton Land, 723 F.2d at 1552 ([D]eterminative question is whether a common entity has the power to control the related business operations.). We conclude that SFG was under common control.
9 Common business purpose is not defined by the FLSA, but the test is about the same as the one for related activities. See Brock v. Executive Towers, Inc., 796 F.2d 698, 700 (4th Cir.1986); cf. Brennan v. Veterans Cleaning Serv., Inc., 482 F.2d 1362, 1367 (5th Cir.1973) (More than a common goal to make a profit ... must be shown to satisfy the requirement.). These nightclubs shared a common purpose, which was to provide entertainment, alcohol and female companionship for businessmen.
10 SFG has related activities and a common purpose with the other defendants. Although it is less clear whether SFG was subject to common control by the enterprise, [t]he Fair Labor Standards Act is to be construed liberally because by it Congress intended to protect the country's workers. Grim Hotel, 747 F.2d at 971. We hold that SFG was part of the enterprise within the intent of the FLSA. 11