Falk v. Brennan

Background

The dispute involves partners who run a real estate management firm (Drucker & Falk) that manages several apartment complexes for owners and the Secretary of Labor, who sued over alleged wage-and-hour violations for maintenance workers. D & F collects rents as agent, pays building expenses, and receives a fixed percentage commission from owners. D & F argued it was not an "enterprise" subject to the law and that it was not the workers’ employer; lower courts disagreed about whether gross rentals or D & F’s commissions should count toward the dollar-volume test.

Reasoning

The Court held that the maintenance workers are employees of the building owners but that D & F also qualifies as an "employer" because it controlled workers’ terms and conditions. Relying on an earlier case about integrated management operations, the Court concluded the relevant enterprise is D & F's sale of professional management services. Therefore the proper measure of the enterprise’s annual gross business is D & F’s commissions, not the total rents paid by tenants. Because those commissions did not reach the $500,000 statutory threshold for the period in question, D & F was not an "enterprise engaged in commerce" under the Act.

Real world impact

The decision changes how some property managers will be tested for coverage: firms will be measured by fees they charge for management services rather than by tenant rents they handle as agents. The case was sent back to the District Court for further proceedings consistent with this ruling. The Court left open other factual questions, such as separate insurance or real estate sales activities, for later consideration.

Dissents or concurrances

Justice Brennan (joined by three Justices) agreed D & F was an employer but disagreed with excluding brokerage and rent-related receipts, arguing those receipts and reimbursements should count toward the dollar-volume test and likely exceed $500,000.