Opinion ID: 6478
Heading Depth: 2
Heading Rank: 1

Heading: Single Enterprise

Text: 16 At the outset, we must determine whether Bay and BBI were a single enterprise for the purposes of 29 U.S.C. Sec. 203(r). Whether Bay and BBI were a single enterprise is a question of law, which we review de novo. Donovan v. Weber, 723 F.2d 1388, 1391-92 (8th Cir.1984); Dunlop v. Ashy, 555 F.2d 1228, 1229 (5th Cir.1977). To establish that two entities functioned as a single enterprise, the Secretary must demonstrate that the entities: (1) engaged in related activities; (2) were a unified operation or under common control; and (3) shared a common business purpose. 29 U.S.C. Sec. 203(r); Ashy, 555 F.2d at 1229. In addressing each of these elements, we must construe liberally the FLSA while applying it with reason and in a common sense fashion. Ashy, 555 F.2d at 1234.
17 Because the FLSA does not define the term related activities, the district court relied on 29 C.F.R. Sec. 779.206, citing S.Rep. No. 145, 87th Cong., 1st Sess. at 41, for a definition. That section of the Code of Federal Regulations indicates that 18 activities will be regarded as 'related' when they are the same or similar or when they are auxiliary or service activities such as warehousing, bookkeeping, purchasing, advertising, including, generally, all activities which are necessary to the operation and maintenance of the particular business.... The Senate Report on the 1966 amendments makes it plain that related, even if somewhat different, business activities can frequently be part of the same enterprise, and that activities having a reasonable connection with the major purpose of an enterprise would be considered related. 19 Id. 20 Under this definition the district court properly concluded that Bay and BBI engaged in related activities. The two companies shared office space under one name, Berry, the family name of the owners of both companies. Bay and BBI also shared several officers and directors. Bay provided BBI with bookkeeping, payroll, recruitment, and advertising services. Both companies kept business records in the same area, and the same individual controlled the records of both companies. 21 Although Bay is in the business of leasing equipment and BBI was in the business of providing labor, two different purposes, the two entities operations were inextricably linked. Supplying Bay with labor constituted 90% of BBI's business, Bay received the majority of its blue collar labor from BBI, and BBI closed its shop when Bay ceased utilizing its services. The examples discussed in Code of Federal Regulations support this conclusion. See 29 C.F.R. Sec. 779.306; see also Brennan v. Veterans Cleaning Serv., Inc., 482 F.2d 1362, 1366-67 (5th Cir.1973) (discussing the meaning of related and auxiliary and service activities). Bay and BBI had extensive related activities for the purposes of Section 203(r).
22 Section 203(r) also requires proof of either common control or unified operation of the companies. 29 U.S.C. Sec. 203(r); Dunlop v. Lourub Pharmacy, Inc., 525 F.2d 235, 236 (6th Cir.1975). The Code of Federal Regulations provides guidance as to what constitutes common control: 23 The word control may be defined as the act of fact of controlling; power or authority to control; directing or restraining domination. Control thus includes the power or authority to control.... [It] includes the power to direct, restrict, regulate, govern, or administer the performance of the activities. Common control includes the sharing of control and it is not limited to sole control or complete control by one person or corporation. Common control therefore exists where the performance of the described activities are controlled by one person or by a number of persons, corporations, or other organizational units acting together. 24 29 C.F.R. Sec. 779.221. 25 The similarities between those in control of Bay and BBI were extensive: Berry Family Member Bay Positions BBI Positions ------------------- --------------------------------- ----------------------- Kenneth VicePresident, Assistant Director Secretary, and Director Dennis Vice President Director Marvin G. Vice President Director Marvin L. Director & Owner Laura Director & Owner Allen Sole Owner 11/8812/90; Director ---------- 26 The only individuals unrelated to the Berry family who held management positions in BBI were Howard Kovar, James G. Gilbert, Jr. and Donald Spangler, vice-presidents; and Charlene Washburn, Secretary-Treasurer. 27 In determining whether Bay and BBI had common control, the determinative question is whether a common entity has the power to control the related business operations. Donovan v. Easton Land & Development, Inc., 723 F.2d 1549, 1552-53 (11th Cir.1984), citing Shultz v. Mack Farland & Sons Roofing Co., 413 F.2d 1296, 1301 (5th Cir.1969). At the time Bay and BBI entered into the labor arrangement at issue, three of the Berry brothers held positions of control in both companies, and members of the Berry family owned both companies. These facts support the conclusion that Bay and BBI were under common control. See Mack Farland, 413 F.2d at 1301 (Common control may exist ... despite the separate management of the individual establishments.). 28 Bay and BBI also had a unified operation. The Code of Federal Regulations also informs on the definition of a unified operation: 29 Whether there is unified operation of related activities will thus be of concern primarily in those cases where the related activities are separately owned or controlled but where, through arrangement, agreement or otherwise, they are so performed as to constitute a unified business system organized for a common business purpose. 30 29 C.F.R. Sec. 779.220 (1993). Bay performed many different functions for BBI, including advertising for recruitment, payroll, and bookkeeping. As the district court explained, Bay and BBI 31 were mutually parasitic. Both Bay and BBI received benefits because of their unification. Bay saved money by having BBI administer the worker's compensation, insurance and unemployment coverage. BBI benefitted from its relationship with Bay through reduced administrative costs, increased rent, and combined recruitment costs. 32 These facts suggest that BBI and Bay were engaged in a unified business operation. See Easton Land, 723 F.2d at 1552.
33 Having established that Bay and BBI were engaged in related activities and had unified operation or common control, it becomes manifest that Bay and BBI also shared a common business purpose. A common business purpose exists if the separate corporations engaged in complementary businesses, and were to a significant degree operationally interdependent. Donovan v. Janitorial Services, Inc., 672 F.2d 528, 530 (5th Cir.1982). See also Donovan v. Grim Hotel Co., 747 F.2d 966, 971 (5th Cir.1984); Brennan v. Veterans Cleaning Serv., Inc., 482 F.2d 1362, 1367 (5th Cir.1973). As previously explained, Bay and BBI complemented and depended on each other; Bay filled its labor needs with BBI employees, and constituted over 90% of BBI's business. Bay and BBI do not raise any arguments that challenge this conclusion. Because all three elements of an enterprise are satisfied, the district court correctly held that Bay and BBI were a single enterprise for the purposes of the FLSA from February 2, 1988 to December 31, 1990.