District Court Orders Trial To Determine Whether Local Towing Company Is Covered "Enterprise" Under FLSA
Enterprise coverage under the Fair Labor Standards Act is broadly defined, seeking to include in its expansive definition of FLSA covered employers substantially all businesses with greater than $500,000 in gross revenues which have “employees engaged in commerce or in the production of goods for commerce, or that have employees “handling, selling, or otherwise working on goods or materials that have been moved in or produced for commerce.” 29 U.S.C. § 203(s)(1). Even local businesses arguably falling outside this definition can be subjected to protracted legal proceedings under the FLSA, in which coverage is the initial focus of the dispute. A recent decision issued by Judge James C. Cacheris of the Eastern District of Virginia. Rains v. E. Coast Towing & Storage, LLC, 2011 U.S. Dist. LEXIS 106915 (E.D. Va. Sept. 20, 2011) is instructive as to the analysis and scope of “enterprise coverage.”.
Rains concerned the FLSA overtime claim of a plaintiff tow truck driver for defendant East Coast Towing & Storage, LLC, a company towing vehicles within Virginia. Because plaintiff produced “specific evidence suggesting that East Coast Towing had employees handling and working on goods and materials that had been moved in or produced for commerce”, including “truck[s] that had been manufactured outside . . . Virginia,” whether the business was a covered enterprise under the FLSA turned on the “revenue” prong of the enterprise coverage test, namely whether Defendant’s gross volume of sales was greater than $500,000 in any given year. In moving for summary judgment on the issue of coverage, Defendant produced tax returns for the years 2008 and 2009, as well as a Statement of Revenue and Expenses for 2010 indicating annual receipts between $201,322 and $428,176, along with an affidavit from the company’s owner stating that the company had never made more than $500,000. Plaintiff sought to rebut this evidence with testimony from himself and two other former employees which purported to estimate the average number of vehicles towed per day by Defendant, and the average amount charge per tow. Plaintiff asserted that, based on the figures at the lowest end of the range demonstrated by this evidence, Defendant had annual revenue of approximately $684,375.
The court found this conflicting evidence sufficient to raise a genuine issue of material fact as to Defendant’s annual revenues, and rejected Defendant’s argument that plaintiff could not possibly have had personal knowledge of the number of vehicles towed during shifts when he was not working, based on his assertion that he had “constant interaction with East Coast Towing as a small company, and [was] one of only three night time staff.” The court also rejected Defendant’s attack on the supporting affidavit of one of the other employees which questioned the sufficiency of that employee’s knowledge of the amount Defendant received per tow, and further observed that the affidavit indicated the employer’s preference for accepting cash payments (evidence tending to indicate that Defendant’s “official” tax evidence did not encompass all revenue for purposes of the FLSA test).
While some small businesses truly are not FLSA-covered under the enterprise coverage test, such “local” entities can still be subject to legal proceedings seeking to apply the FLSA’s provisions to their business, as Rains demonstrates. Further, businesses can be subject to FLSA suits from employees who are covered by the Act due to their individual involvement in commerce. And, of course, many state wage-and-hour laws provide broader coverage than the FLSA. Employers of all sizes, and particularly non-profit organizations, should analyze whether they are subject to coverage under the FLSA and/or applicable state laws.