to most, if not all of the managed properties.
(e) Arnheim and Neely, Inc. schedules the hours to be worked by all persons engaged at the managed properties.
(f) Arnheim and Neely, Inc. determines the rates of pay of all employees engaged at the managed properties, subject to approval of building owners without exception. . . .
(g) Arnheim and Neely, Inc. determines the method of payment of all persons engaged at the managed properties, subject to union agreement, if any.
(h) Arnheim and Neely, Inc. establishes fringe benefits for all persons engaged at the managed properties, subject to owner's approval.
(i) Arnheim and Neely, Inc. negotiates union contracts in regard to those persons engaged at the managed properties who are union members. . . .
(j) Arnheim and Neely, Inc. prepares the payroll for all persons engaged at the managed properties.
(k) All persons engaged at the managed properties are paid by means of Arnheim and Neely, Inc. checks, drawn on the appropriate owner's account.
(1) Persons on Armheim and Neely, Inc's [sic] staff are assigned managerial responsibility for one or more of the particular buildings.
(m) Arnheim and Neely, Inc., through its staff manager or through the building superintendent, assigns the persons engaged at the buildings to the various required duties and supervises the performance thereof.
(n) Promotions or reductions in rank and increases or decreases in pay as to the persons engaged at the managed buildings are determined by Arnheim and Neely, Inc., subject to owner's approval.
(o) Arnheim and Neely, Inc. makes legal deductions, including Income Tax, Social Security, etc., from the pay checks of all persons engaged at the managed buildings.
(p) The 'Contract for Management' (Exhibit 1 [to the Stipulation]) provides, with respect to the managed buildings, 'that all employees shall be deemed the employees of the Owner and not the Agent.'"
Elsewhere in the Stipulation, it is asserted that "[each] building owner has separate employer's identification numbers for federal, state, and city payroll taxes." [Stip. P 301(g)]
Section 3 of the Fair Labor Standards Act defines the following terms:
* * *
"(d) 'Employer' includes any person acting directly or indirectly in the interest of an employer in relation to an employee . . . ." 29 U.S.C. § 203(d).
"(e) 'Employee' includes any individual employed by an employer." 29 U.S.C. § 203(e).
In Greenberg v. Arsenal Bldg. Corp., 50 F. Supp. 700 (S.D.N.Y. 1943), aff'd per curiam 144 F.2d 292 (2 Cir. 1944), rev'd in part on other grounds sub nom. Brooklyn Bank v. O'Neil, 324 U.S. 697, 65 S. Ct. 895, 89 L. Ed. 1296 (1945), where suit was brought against a building rental agent, both the District and the Circuit Court held the defendant to be an "employer" within the meaning of the Act.
Viewed broadly, the relationship described in the Stipulation between defendant and the employees comports with the statutory standard of employer-employee. See United States v. Silk, 331 U.S. 704, 67 S. Ct. 1463, 91 L. Ed. 1757 (1947). It remains only to review certain aspects peculiar to this relationship to determine whether or not they require a contrary determination.
In Bartels v. Birmingham, 332 U.S. 126, 67 S. Ct. 1547, 91 L. Ed. 1947, 172 A.L.R. 317 (1947), band leaders resisted liability to their musicians on the grounds, inter alia, that the leaders' contracts with ballroom operators specified that the musicians were to be regarded as employees of the operators rather than of the leaders. The agreements also required filing of various social security taxes by the operators. Notwithstanding these features, the Supreme Court, reversing the Circuit Court's judgment, held the leaders liable.
The sole remaining element to be considered is the reservation by the owners of a right to review certain of defendant's determinations regarding the management of its building. It may well be that these provisions vest the owners with certain control over the employees. However, the Act recognizes the concept of joint employment. Mitchell v. John R. Cowley & Bro., Inc., 292 F.2d 105 (5 Cir. 1961); Wirtz v. Hebert, 368 F.2d 139 (5 Cir. 1966); Mid-Continent Pipe Line Co. v. Hargrave, 129 F.2d 655 (10 Cir. 1942). Although the proprietors of the individual buildings may perhaps be deemed employers, Wirtz v. Columbian Mutual Life Ins. Co., 246 F. Supp. 198, 201 (W.D. Tenn. 1965), this circumstance does not foreclose treating defendant as an employer within the meaning of the Act.
Defendant contends that Congress' adoption of the "enterprise" formula in 1961 requires a new test for determining the employer-employee relationship. We cannot agree. The Fair Labor Standards Amendment of 1961, Pub. L. 87-30; 75 Stat. 65 (U.S. Code Cong. & Adm. News 1961, p. 71 et seq.), changed the basis of the prior provision limiting coverage to employees "engaged in commerce or in the production of goods for commerce" and provided coverage to all employees in an "'enterprise' engaged in commerce or production for commerce." Maryland v. Wirtz, 392 U.S. 183, 185, 186, 88 S. Ct. 2017, 20 L. Ed. 2d 1020 (1968). The 1961 amendments were unaccompanied by any modification in the definition of "employee", "employer" or "employment."
The decisional law reflects no change in the pre-1961 principle utilized for determining the employer-employee relationship.
Defendant relies on the statement in Bartels v. Birmingham, supra : " . . . In the application of social legislation employees are those who as a matter of economic reality are dependent upon the business to which they render service." 332 U.S. 126, 67 S. Ct. 1547, 91 L. Ed. 1947. It contends that the business to which they render service is the building rather than plaintiff.
The statement in Bartels must be interpreted in the light of the judicial history construing the term "employee." As described in Illinois Tri-Seal Products, Inc. v. United States, 173 Ct. Cl. 499, 353 F.2d 216 (Ct. Cl. 1965), in the years following the enactment of the Act in 1935, the Treasury Department and a majority of the courts held that the term was to be given its common-law meaning, which was grounded in the element of control. In 1947, the Supreme Court decided United States v. Silk, supra, holding that a "constricted interpretation" of the term "employee" to exclude all who are independent contractors within common-law concepts failed "to accomplish the purposes of the legislation." 331 U.S. 704, 67 S. Ct. 1463, 91 L. Ed. 1757.
Defendant seeks to utilize the "economic reality" doctrine to mitigate the indicia of its control of the employees. No warrant for this lies in the decisional law.
Defendant cites a section of the Senate Report No. 1487, 89th Cong., 2d Sess. (1966), on the 1966 Amendments to evidence a legislative intent to treat the employees in question as employees of the building owners:
" . . . where a person other than the owner of an apartment building is engaged by the owner to perform management services in connection with the operation of the building, these individuals employed at and resident in the building as managers, caretakers, janitors, or in a similar capacity shall be considered for the purposes of this subsection employees of the building owner." 1966 U.S. Code Cong. & Adm. News, p. 3029.
Senate Report No. 1487 proposed the inclusion of equivalent language in an amended section 3(s). However, the Senate-House Conference Committee rejected the Senate's proposed amendment. 1966 Cong. Rec. 22651 (daily ed. Sept. 14, 1966). The Congressional treatment of the issue fortifies our conclusion that the relationship between building employees and management-agents should be determined in accordance with the customary principles obtaining under the Act.
We conclude that the stipulated issue must be answered in the affirmative.
"In determining 'annual gross volume of sales made or business done' by the defendant within the meaning of Section 3(s) of the Act, are the gross rentals from the aforementioned management activities to be included or merely the commissions obtained by the defendant from such activities?" [Stip. P 6]
According to the Stipulation, the annual gross rental income collected by defendant from the managed buildings exceeded $1,000,000 per annum. [Stip. P 206] Defendant's commissions on these rentals approximated or exceeded $200,000 in 1964 and 1965, and $250,000 in 1966 and thereafter. [Stip. P 207] Commissions have never exceeded $500,000 per annum. [Ibid]
The Fair Labor Standards Amendments of 1961, supra, established as one condition to "enterprise" coverage an "annual gross volume of sales of such enterprise . . . not less than $1,000,000." 29 U.S.C. § 203(s)(3) (1958 Ed. Supp. V). The Fair Labor Standards Amendments of 1966, supra, require for the period February 1, 1967, through January 31, 1969, a minimum "annual gross volume of sales" of $500,000 and thereafter of $250,000. 29 U.S.C. § 203(s)(1) (1964 Ed. Supp. II).
Defendant contends that only its commissions of rentals should be included in determining its "annual gross volume of sales." In this instance, the statutory requirement for coverage would not have been satisfied until February 1, 1969. The Government argues that the computation of defendant's "annual gross volume of sales" requires inclusion of all rentals collected by defendant.
The Senate Report on the 1961 Amendments expressed the underlying philosophy of the provision and asserted:
" . . . The million dollar test is an economic test. It is the line which the Congress must draw in determining who shall and who shall not be covered by a minimum wage. It is a way of saying that anyone who is operating a business of that size in commerce can afford to pay his employees the minimum wage under this law." S. Rep., No. 145, 87th Cong., 1st Sess., U.S. Code Cong. & Adm. News 1961, p. 1624. Quoted in Wirtz v. Savannah Bank & Trust Co. of Savannah, 362 F.2d 857, 862 (5 Cir. 1966); Wirtz v. Columbian Mutual Life Ins. Co., supra, 246 F. Supp. 203; Wirtz v. First National Bank and Trust Co., 365 F.2d 641, 645n (10 Cir. 1966).