Opinion ID: 444146
Heading Depth: 1
Heading Rank: 1

Heading: facts

Text: 3 The employees whose wages are in issue work in five hotels in five different Texas cities. Each of the five hotels is owned by a corporate defendant, and each of these corporations has the one hotel as its sole asset. The remaining defendant, Charles Alberding, is president of the five hotel-owning corporations. 4 Alberding incorporated those corporations and has managed their operation. His wife has been the secretary-treasurer of the corporations, and his close business associate, J.E. Scally, has been their vice-president until recently. The board of directors of each corporation has consisted of Alberding, his wife, and Scally. Though the stock of the corporations has been transferred within the Alberding family, virtually all of it has been owned by Alberding, his wife or their daughters. 5 Alberding and the five defendant corporations controlled and managed by him contend that, by virtue of this corporate fragmentation of his/their hotel operations, they are not a single enterprise, see I infra, and he himself is not an employer, see II infra, for purposes of coverage of the Fair Labor Standards Act. The courts have in the past rejected similar efforts through corporate fragmentation by Alberding to avoid obligations and liabilities under the Act. 3 In its thorough and thoughtful memorandum opinion, the district court likewise rejected the similar contentions here advanced.
6 The minimum wage and overtime provisions of the Fair Labor Standards Act apply to employees of an enterprise engaged in commerce or in the production of goods for commerce, 29 U.S.C. Secs. 206, 207, which enterprise is statutorily defined, inter alia, as requiring an annual gross volume of business done as not less than $250,000, 29 U.S.C. Sec. 203(s)(1). The parties have stipulated that each of the hotel corporations has not had a sufficient dollar volume of business to come within the Act's definition of an enterprise engaged in commerce. 29 U.S.C. Sec. 203(s). The parties also stipulated, however, that the hotel corporations, considered as a group, did meet the Act's dollar volume requirement. Accordingly, the obligation of the corporations to conform to the Act's wage and hour requirements depends on whether the hotel corporations, viewed together, constitute an enterprise. The Act defines this term as follows: 7 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 by one or more corporate or other organizational units.... 8 29 U.S.C. Sec. 203(r). This court has considered this statutory definition, its legislative history, and interpretive administrative regulations, and we have concluded that, despite corporate fragmentation in operation, a single enterprise nevertheless exists for the purpose of the Act, where: (A) the corporations perform related activities, (B) through unified operation or common control, (C) for a common business purpose. Donovan v. Janitorial Services, Inc., 672 F.2d 528, 530 (5th Cir.1982); Brennan v. Veterans Cleaning Service, Inc., 482 F.2d 1362, 1366-67 (5th Cir.1973); Shultz v. Mack Farland & Sons Roofing Co., 413 F.2d 1296, 1299 (5th Cir.1969). 4 The district court correctly found that these three tests are met in the present case.
9 The defendants contend that the five hotel corporations do not engage in related activities because the ratio of long-term to short-term guests is different at each. To accept this contention would be to recognize distinctions so fine as to be inconsistent with our previous decisions. See Donovan v. Janitorial Services, Inc., 672 F.2d at 529-30 (janitorial service, maid, and garbage collection companies); Brennan v. Veterans Cleaning Service, Inc., 482 F.2d at 1364-67 (janitorial, maid, and sewer and septic tank cleaning services). 10 The district court found that each hotel corporation owned a hotel that operated in the same or a similar manner. At one time, Alberding and his business associates planned to place all their hotels under the banner Alsonett; though this never became a formal hotel group, the hotels loosely operated under the name. Employees at one hotel assisted, from time to time, at others. By whatever analysis, however, businesses, calling themselves hotels and operating as hotels, whether their guests stay a short or long while, are engaged in related activities for the purpose of the Act.
11 By emphasizing the formally distinct nature of the hotel corporations and the day-to-day management of the hotels by different managers, the defendants challenge the district court's conclusion of unified operation and common control. 12 Nevertheless, [w]e take the view that these factors are simply the ordinary attributes of separate incorporation and the management of physically separate units. Shultz v. Mack Farland & Sons Roofing Co., supra, 413 F.2d at 1300. We must look beyond formalistic corporate separation to the actual or pragmatic operation and control, whether unified or, instead, separate as to each unit. How centralized is the making of significant corporate decisions? Did a single source create and fund the corporations or businesses in issue or were they created and funded by separate interests? How interdependent are those corporations or businesses in actual operation? Are they held out to the public singly or collectively? See Donovan v. Janitorial Services, Inc., supra, 672 F.2d at 530; Shultz v. Mack Farland & Sons Roofing Co., supra, 413 F.2d at 1300-01. 13 The district court found facts to establish each of these unified operation and common control indicators. Of utmost significance, Alberding, as the defendants admit, had and exercised the power to hire and fire the manager of each hotel. Much like a commander and his generals, this put one man, Alberding, at the apex of hotel operations. See Shultz v. Mack Farland & Sons Roofing Co., supra, 413 F.2d at 1301. 14 Beyond his control of the hotel managers, though, the district court found that Alberding incorporated all of the hotel corporations, personally funded them when necessary, and had final and virtually sole authority to approve significant expenditures. He was authorized to sign on the bank account of every hotel. Money talks. Id. Indeed, Alberding was the only person who could approve across-the-board adherence to federal minimum wage and overtime requirements. That, indeed, is a most significant control indicator in a wage and hours action. 15 Finally, the hotels loosely operated under the informal Alsonett banner. Employees, albeit infrequently, shifted employment from one hotel to another. Furniture was shifted from one hotel to another. Alberding-related companies provided bookkeeping and financial services to the hotels. Each hotel corporation shared the same officers and directors, and there was what the district court termed a fluid shifting of debits and credits between the various corporations. 16 There was abundant evidence that the hotels were centrally directed, connected, and interdependent. They were a loose-knit group, owned by the Alberding family, firmly coordinated and controlled by Alberding. Except for the formality of incorporation and the ownership of stock by different members of the Alberding family, the hotels were centrally controlled by and operated as a single group. 5
17 The defendants weakly challenge the common business purpose conclusion of the district court. The unified operation of the hotels, their related activities and interdependencies, the centralization of control in Alberding, the centralization of ownership in the Alberding family--all these are indicators of common business purpose. They establish [m]ore than a common goal to make a profit. Brennan v. Veterans Cleaning Service, Inc., supra, 482 F.2d at 1367. They establish a family owned and operated business existing for the purpose of operating a group of hotels for the profit of the Alberding family. In short, the commonly-controlled corporate entities were operated, within the meaning of the Act, for a common business purpose.