Coverage of the Fair Labor Standards Act: what connection with commerce brings an employee within the coverage of the Fair Labor Standards Act?

• Author: Spero, Donald J.
• Position: Part 2

Part one of this article in the May issue of The Florida Bar Journal focused on the applicability of the FLSA to employees engaged in commerce or in the production of goods for commerce. This part discusses the expansion of FLSA by the 1961 amendments to the act which added "enterprise" coverage. Thereafter all employees of an enterprise engaged in commerce were covered notwithstanding that some of those employees might not themselves be engaged in a commerce-connected activity. Also discussed will be the further expansion of enterprise coverage by the 1974 amendment.

The 1961 Amendments

Courts have differed on the requisites of enterprise coverage as it existed in the 1961 amendments to the FLSA. The difference came from the words in the portion of the definition of enterprise which included employers that had employees "handling, selling, or otherwise working on goods that have been moved in or produced for commerce...." (Emphasis supplied.) The definition of goods in [section] 203(f) excludes "goods after their delivery into the actual physical possession of the ultimate consumer thereof other than a producer, manufacturer, or processor thereof." (Emphasis supplied.) A frequent issue was who is the ultimate consumer?

The owner of an apartment house was found to be a covered enterprise in Brennan v. Dillion, 483 F.2d 1334 (10th Cir. 1973). In the view of the court the owner was not the ultimate consumer of goods that came from out of the state for use in the building. The tenants were the ultimate consumers. The court reasoned that the goods were for the tenants to whom they were resold. The tenants paid for the goods in their rent. The court further found that "The admitted handling of the merchandise by the employees in the regular course of defendant's business made them engaged in the production of goods for commerce." (1)

In Brennan v. State of Iowa, 494 F.2d 104 (8th Cir. 1974), state hospitals whose employees handled medicines, equipment, bed linens, cleaning supplies as well as office supplies and equipment that came from outside the state were held not to be the ultimate consumers of these items. The court pointed out as examples that "medical employees administer drugs that have moved interstate, that employees that provide patient care handle cleaning supplies that have moved interstate, that food service employees dispense food that has moved interstate, and that housekeeping and laundry employees handle supplies that have moved interstate." (2) Since the institutions were not the ultimate consumers, the goods were moving in commerce when handled by the employees. Accordingly, their employer was an enterprise covered by the FLSA.

A similar conclusion was reached in Brennan v. State of Indiana, 517 F.2d 1179 (7th Cir. 1975), which also decided that various state institutions including schools and hospitals were not the ultimate consumers of a variety of items received from out of state. The court reasoned that:

The items handled by the employees ... are for "the use and benefit" of the students and patients. They are a necessary part of the...