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Code of Federal Regulations Pertaining to U.S. Department of Labor |
| Labor |
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| Wage and Hour Division, Department of Labor |
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| The Fair Labor Standards Act As Applied to Retailers of Goods or Services |
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| Employment to Which the Act May Apply; Enterprise Coverage |
29 CFR 779.229 - Other arrangements.
- Section Number: 779.229
- Section Name: Other arrangements.
With respect to those arrangements specifically described in the
proviso contained in the definition, an independently owned retail or
service establishment will not be considered to be other than a separate
and distinct enterprise, if other arrangements the establishment makes
do not have the effect of bringing the establishment within a larger
enterprise. Whether or not other arrangements have such an effect will
necessarily depend upon all the facts. The Senate Report makes the
following observations with respect to this:
Thus the mere fact that a group of independently owned and operated
stores join together to combine their purchasing activities or to run
combined advertising will not for these reasons mean that their
activities are performed through unified operation or common control and
they will not for these reasons be considered a part of the same
``enterprise.'' This is also the case in food retailing because of the
great extent to which local independent food store operators have joined
together in many phases of their business. While maintaining their
stores as independently owned units, they have affiliated together not
just for the purchasing of merchandise, but also for providing numerous
other services such as (1) central warehousing; (2) advertising; (3)
sales promotions; (4) managerial advice; (5) store engineering; (6)
accounting systems; (7) site locations; and (8) hospitalization and life
insurance protection. (S. Rept. 145, 87th Cong., 1st Sess., p. 42.)
The report continues with the following observations:
Whether such arrangements bring the establishment within the
franchisor's, lessor's, or grantor's ``enterprise'' is a question to be
determined on all the facts. The facts may show that the arrangements
reserve the necessary right of control in the grantor or unify the
operations among the separate ``franchised'' establishments so as to
create an economic unity of related activities for a common business
purpose. In that case, the ``franchised'' establishment will be
considered a part of the same ``enterprise.'' For example, whether a
franchise, lease, or other contractual arrangement between a distributor
and a retail dealer has the effect of bringing the dealer's
establishments within the enterprise of the distributor will depend upon
the terms of the agreements and the related facts concerning the
relationship between the parties.
There may be a number of different types of arrangements established
in such cases. The key in each case may be found in the answer to the
question, ``Who receives the profits, suffers the losses, sets the wages
and working conditions of employees, or otherwise manages the business
in those respects which are the common attributes of an independent
businessman operating a business for profit?''
For instance, a bona fide independent automobile dealer will not be
considered a part of the enterprise of the automobile manufacturer or of
the distributor. Likewise, the same result will also obtain with respect
to the independent components of a shopping center.
In all of these cases if it is found on the basis of all the facts
and circumstances that the arrangements are so restrictive as to
products, prices, profits, or management as to deny the ``franchised''
establishment the essential prerogatives of the ordinary independent
businessman, the establishment, the dealer, or concessionaire will be
considered an integral part of the related activities of the enterprise
which grants the franchise, right, or concession. (S. Rept. 145, 87th
Cong., 1st Sess., p. 42.)
Thus, there may be a number of different types of arrangements
established in such cases, and the determination as to whether the
arrangements create a larger ``enterprise'' will necessarily depend on
all the facts. Some arrangements which do not create a larger enterprise
and some which do are discussed in Secs. 779.230 through 779.235.
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