--- kind: "range" citation: "29 C.F.R. §§ 779.201–779.235" title: "29" from: "779.201" to: "779.235" count: 35 url: "https://uscodex.org/cfr/29/779.201..779.235" --- # §779.201. The place of the term “enterprise” in the Act. The term “enterprise” is defined in section 3(r) of the Act and, wherever used in the Act, is governed by this definition. ([§ 779.21(a)](/cfr/29/779.21.md?p=a) provides that portion of the definition of “enterprise” which is pertinent with respect to retail and service enterprises.) The term is a key in determining the applicability of the Act to these businesses. The “enterprise” is the unit for determining whether the conditions of [section 3(s)(1) through (5)](/cfr/29/3.md?p=s-1..s-5) of the prior Act and [section 3(s)(1) through (4)](/cfr/29/3.md?p=s-1..s-4) of the amended Act, including, where applicable, the requisite dollar volume are met. The “enterprise” is also the unit for determining which employees not individually covered by the Act are entitled to the minimum wage, overtime, and equal pay benefits, and to the child labor protection, under sections [6](/cfr/29/6.md), [7](/cfr/29/7.md), and [12](/cfr/29/12.md) of the Act. In general, if the “enterprise” comes within any of the categories described in [section 3(s)(1) through (5)](/cfr/29/3.md?p=s-1..s-5) of the prior Act or [section 3(s)(1) through (4)](/cfr/29/3.md?p=s-1..s-4) of the amended Act, all employees employed in the “enterprise” are covered by the Act and, regardless of their duties, are entitled to the Act's benefits unless a specific exemption applies. # §779.202. Basic concepts of definition. Under the definition, the “enterprise” consists of “the related activities performed * * * for a common business purpose.” All of the activities comprising the enterprise must be “related.” Activities serving a single business purpose may be related, although different, but other activities which are not related are not included in the enterprise. The definition makes clear that the enterprise includes all such related activities which are performed through “unified operation” or “common control.” This is true even if they are performed by more than one person, or in more than one establishment, or by more than one corporate or other organizational unit. Specifically included, as a part of the enterprise, are departments of an establishment operated through leasing arrangements. On the other hand, the definition excludes from the “enterprise” activities only performed “for” the enterprise rather than as a part of it by an independent contractor even if they are related to the activities of the enterprise. Also, it makes clear that a truly independent retail or service establishment does not become a part of a larger enterprise merely because it enters into certain types of franchise or collective purchasing arrangements or because it has a common landlord with other such retail establishments. # §779.203. Distinction between “enterprise,” “establishment,” and “employer.” The coverage, exemption and other provisions of the Act depend, in part, on the scope of the terms employer, establishment, or enterprise. As explained more fully in [part 776](/cfr/29/part776.md) of this chapter, these terms are not synonymous. The term employer has been defined in the Act since its inception and has a well established meaning. As defined in [section 3(d)](/cfr/29/3.md?p=d), it includes, with certain stated exceptions, any person acting directly or indirectly in the interest of an employer in relation to an employee. (See [§ 779.19](/cfr/29/779.19.md).) The term establishment means a distinct physical place of business rather than an entire business or enterprise. (See [§ 779.23](/cfr/29/779.23.md).) The term enterprise was not used in the Act prior to the 1961 amendments, but the careful definition and the legislative history of the 1961 and 1966 amendments provide guidance as to its meaning and application. As defined in the Act, the term enterprise is roughly descriptive of a business rather than of an establishment or of an employer although on occasion the three may coincide. The enterprise may consist of a single establishment (see [§ 779.204(a)](/cfr/29/779.204.md?p=a)) which may be operated by one or more employers; or it may be composed of a number of establishments which may be operated by one or more employers (see [§ 779.204(b)](/cfr/29/779.204.md?p=b)). The enterprise is not necessarily coextensive with the entire business activities of an employer; a single employer may operate more than one enterprise (see [§ 779.204(c)](/cfr/29/779.204.md?p=c)). The Act treats as separate enterprises different businesses which are unrelated to each other even if they are operated by the same employer. # §779.204. Common types of “enterprise.” - (a) **The single establishment business.** In the simplest type of organization—the entire business ordinarily is one enterprise. The entire business activity of the single owner-employer may be performed in one establishment, as in the typical independently owned and controlled retail store. In that case the establishment and the enterprise are one and the same. All of the activities of the store are “related” and are performed for a single business purpose and there is both unified operation and common control. The entire business is the unit for applying the statutory tests. If the coverage tests are met, all of the employees employed by the establishment are employed in the enterprise and will be entitled to the benefits of the Act unless otherwise exempt. - (b) **The multiunit business.** In many cases, as in the typical chain of retail stores, one company conducts its single business in a number of establishments. All of the activities ordinarily are related and performed for one business purpose, the single company which owns the chain also controls the entire business, and the entire business is a single enterprise. The dollar volume of the entire business from all of its establishments is added together to determine whether the requisite dollar volume tests are met. If the coverage tests are met, all of the employees employed in the business will be entitled to the benefits of the Act unless otherwise exempt. - (c) **Complex business organizations.** In complex retail and service organizations, questions may arise as to whether certain activities are a part of a particular enterprise. In some cases one employer may operate several separate enterprises; in others, several employers may conduct their business activities in such a manner that they are part of a single enterprise. The answer, in each case, as to whether or not the “enterprise” includes certain activities will depend upon whether the particular activities are “related” to the business purpose of such enterprise and whether they are performed with its other activities through “unified operation” or “common control,” or whether, on the other hand, they are performed for a separate and distinct business purpose. As the Senate Report states, # §779.205. Enterprise must consist of “related activities.” The enterprise must consist of certain “related activities” performed for a common business purpose; activities which are not “related” are not a part of the enterprise even if performed by the same employer. Moreover, even if activities are “related” they may be excluded from the enterprise if they are performed only “for” the enterprise and not as a part of it by an independent contractor. This is discussed separately in [§ 779.206](/cfr/29/779.206.md). # §779.206. What are “related activities.” - (a) The Senate Report on the 1961 amendments states as follows, with respect to the meaning of related activities: - (b) Generally, the answer to the question whether particular activities are “related” or not, will depend in each case upon whether the activities serve a business purpose common to all the activities of the enterprise, or whether they serve a separate and unrelated business purpose. For example, where a company operates retail or service establishments, and also engages in a separate and unrelated construction business, the construction activities will not be “related” and will constitute a separate enterprise if they are conducted independently and apart from the retail operations. Where, however, the retail and construction activities are conducted for a common business purpose, they may be “related,” and if they are performed through unified operation or common control, they will be a part of a single enterprise. Thus, a retail store enterprise may engage in construction activities as an additional outlet for building materials which it sells, or otherwise to serve its retail operations. It may act as its own contractor in constructing or reconstructing its own stores and related facilities. In such a case, the construction activities will be “related” activities. Other examples may also be cited. The answer in each case will necessarily depend upon all the facts. # §779.207. Related activities in retail operations. In the case of an enterprise which has one or more retail or service establishments, all of the activities which are performed for the furtherance of the common business purpose of operating the retail or service establishments are “related activities.” It is not material that the enterprise sells different goods or provides different services, or that it operates separate retail or service establishments. As stated in the definition, the enterprise includes all related activities whether performed “in one or more establishments.” Since the activities performed by one retail or service establishment are the “same or similar” to the activities performed by another, they are, as such, “related activities.” (See Senate Report No. 145, 87th Cong. 1st Sess. p. 41.) For example, in operations of a single retailing business a drug store may sell a large variety of different products, and a grocery store may sell clothing and furniture and other goods. Clearly all of these activities are “related.” Similarly it is clear that all activities of a department store are “related activities,” even if the store sells a great variety of different types of goods and services and even if, as in some cases, the departmentalized business is conducted in more than one location, as where the department selling garden supplies or electrical appliances is located on separate premises. Whether on the same premises or at separate locations, the activities involved in retail selling of goods or services, of any type, are related activities and they will be considered one enterprise where they are performed, through unified operation or common control, for a common business purpose. # §779.208. Auxiliary activities which are “related activities.” As stated in Senate Report No. 145, 87th Congress, 1st Session, cited in [§ 779.206](/cfr/29/779.206.md), auxiliary and service activities, such as central office and warehousing activities and bookkeeping, auditing, purchasing, advertising and other similar services, also are “related activities.” When such activities are performed through unified operation or common control, for a common business purpose, they will be included in the enterprise. The following are some additional examples of auxiliary activities which are “related activities” and which may be included in the enterprise: - (a) Credit rating and collection services; - (b) Promotional activities including advertising, sign painting, display services, stamp redemptions, and prize contests; - (c) Maintenance and repair services of plant machinery and equipment including painting, decorating, and similar services; - (d) Store or plant engineering, site location and related survey activities; - (e) Detective, guard, watchmen, and other protective services; - (f) Delivery services; - (g) The operation of employee or customer parking lots; - (h) The recruitment, hiring and training activities, and other managerial services; - (i) Recreational and health facilities for customers or employees including eating and drinking facilities (note that employees primarily engaged in certain food service activities in retail establishments may be exempt from the overtime provisions under section 13(b)(18) of the Act if the specific conditions are met; see [§ 779.388](/cfr/29/779.388.md)); - (j) The operation of employee benefit and insurance plans; and - (k) **Repair and alteration services on goods for sale or sold to customers.** # §779.209. Vertical activities which are “related activities.” - (a) The Senate Report also states (see [§ 779.206](/cfr/29/779.206.md) that activities are “related” when they are “part of a vertical structure such as the manufacturing, warehousing, and retailing of a particular product or products.” Where such activities are performed through unified operation or common control for a common business purpose they will be regarded as a part of the enterprise. - (b) Whether activities are vertically “related” activities and part of a single enterprise, or whether they constitute separate businesses are separate enterprises, depends upon the facts in each case. In all of these cases of so-called “vertical operations,” the determination whether the activities are “related,” depends upon the extent to which the various business activities, such as a wholesaling and retailing or manufacturing and retailing, are interrelated and interdependent and are performed to serve a business objective common to all. The mere fact that they are under common ownership is not, by itself, sufficient to bring them within the same enterprise. Thus, where a manufacturing business is carried on separately from and wholly independently of a retail business, with neither serving the business purpose of the other, they are separate businesses even if they are under common ownership. However, where the manufacturing operations are performed in substantial part for the purpose of distributing the goods through the retail stores, or the retail outlet serves to carry out a business purpose of the manufacturing plant, retailing and manufacturing will be “related” activities and performed for a “common business purpose,” and they will be a single enterprise if they are performed through unified operations or common control. - (c) In these cases of “vertical operations” a practical judgment will be required to determine whether the activities are maintained and operated as separate and distinct businesses with different objectives or whether they, in fact, constitute a single integrated business enterprise. The answer necessarily will depend upon all the facts in each case. # §779.210. Other activities which may be part of the enterprise. - (a) An enterprise may perform certain activities that appear entirely foreign to its principal business but which may be a part of the enterprise because of the manner in which they are performed. In some cases these activities may be a very minor and incidental part of its business operations. For example a retail store may accept payments of utility bills, provide a notarial service, sell stamps, bus and theater tickets, or travellers' checks, etc. These and other activities may be entirely different from the enterprise's principal business but they may be performed on the same premises and by the same employees or otherwise under such circumstances as to be a part of the enterprise. - (b) Sometimes such activities are performed as an adjunct to the principal business to create good will or to attract customers. In other cases, the businessman may engage in them primarily for the additional revenue. Some such foreign activities may be conducted in a more elaborate manner, as where the enterprise operates a bus stop or a post office substation as an adjunct to a principal business such as a hotel or a retail store. Where in such a case the activities are performed in a physically separate “establishment” (see [§§ 779.303-779.308](/cfr/29/779.303-779.308.md)) from the other business activities of the enterprise and are functionally operated as a separate business, separately controlled, with separate employees, separate records, and a distinct business objective of its own, they may constitute a separate enterprise. Where, however, such activities are intermingled with the other activities of the enterprise and have a reasonable connection to the same business purpose they will be a part of the enterprise. # §779.211. Status of activities which are not “related.” Activities which are not related even if performed by the same employer are not included as a part of the enterprise. The receipts from the unrelated activities will not be counted toward the annual dollar volume of sales or business under [section 3(s)](/cfr/29/3.md?p=s) and the employees performing such unrelated activities will not be covered merely because they work for the same employer. Common ownership standing alone does not bring unrelated activities within the scope of the same enterprise. If, for example, one individual owns or controls a bank, a filing station, and a factory, the mere fact of common ownership will not make them one enterprise. However, if it appears that there is a reasonable relationship of all the activities to a single business purpose a different conclusion might be warranted. Activities which are not “related” will be treated separately for purposes of the tests contained in [section 3(s)(1) through (5)](/cfr/29/3.md?p=s-1..s-5) of the prior Act and [section 3(s)(1) through (4)](/cfr/29/3.md?p=s-1..s-4) of the amended Act. For example, in the case where a single company operates retail grocery stores and also engages in an unrelated business of constructing homes, one “enterprise” for purposes of [section 3(s)(1)](/cfr/29/3.md?p=s-1) of both the prior and the amended Act will consist of the retail grocery stores and any activities related to them, and home construction activities will constitute a separate enterprise. The latter will not be included in determining whether the retail business enterprise meets the conditions of [section 3(s)(1)](/cfr/29/3.md?p=s-1), and the construction employees will not be covered merely because the retail business is covered. The construction business will be considered separately under [section 3(s)(4)](/cfr/29/3.md?p=s-4) of the poor Act and [section 3(s)(3)](/cfr/29/3.md?p=s-3) of the amended Act. # §779.212. Enterprise must consist of related activities performed for a “common business purpose.” The related activities described in [section 3(r)](/cfr/29/3.md?p=r) as included in the statutory enterprise are those performed for a “common business purpose.” (See the comprehensive discussion in [29 CFR part 776](/cfr/29/part776.md).) The term “common business purpose” as used in the definition does not have a narrow concept and is not intended to be limited to a single business establishment or a single type of business. As pointed out above, retailing, wholesaling and manufacturing may, under certain circumstances be engaged in for a “common business purpose.” (See [§ 779.209](/cfr/29/779.209.md).) An example was also cited where retailing and construction were performed for a common business purpose. (See [§ 779.206](/cfr/29/779.206.md).) On the other hand, it is clear that even a single individual or corporation may perform activities for different business purposes. (See [§ 779.211](/cfr/29/779.211.md).) Thus the reports of the House of Representatives cite, as an example of this, the case of a single company which owns several retail apparel stores and is also engaged in the lumbering business. It concludes that these activities are not part of a single enterprise. (H. Rept. 75, 87th Cong.,1st Sess., p. 7 and H. Rept. 1366, 89th Cong. 2d Sess., p. 9.) # §779.213. What is a common business purpose. Generally, the term “common business purpose” will encompass activities whether performed by one person or by more than one person, or corporation, or other business organization, which are directed to the same business objective or to similar objectives in which the group has an interest. The scope of the term “enterprise” encompasses a single business entity as well as a unified business system which performs related activities for a common business purpose. What is a “common business purpose” in any particular case involves a practical judgment based on the facts in the light of the statutory provisions and the legislative intent. The answer ordinarily will be readily apparent from the facts. The facts may show that the activities are related to a single business objective or that they are so operated or controlled as to form a part of a unified business system which is directed to a single business objective. In such cases, it will follow that they are performed for a common business purpose. Where, however, the facts show that the activities are not performed as a part of such enterprise but for an entirely separate and unrelated business, they will be considered performed for a different business purpose and will not be a part of that enterprise. The application of these principles is considered in more detail in [part 776](/cfr/29/part776.md) of this chapter. # §779.214. “Business” purpose. The activities described in [section 3(r)](/cfr/29/3.md?p=r) are included in an enterprise only when they are performed for a “business” purpose. Activities of eleemosynary, religious, or educational organization may be performed for a business purpose. Thus, where such organizations engage in ordinary commercial activities, such as operating a printing and publishing plant, the business activities will be treated under the Act the same as when they are performed by the ordinary business enterprise. (See Mitchell v. Pilgrims Holiness Church Corp., 210 F. 2d 879 (CA-7); cert. den. 347 U.S. 1013.) However, the nonprofit educational, religious, and eleemosynary activities will not be included in the enterprise unless they are of the types which the last sentence of [section 3(r)](/cfr/29/3.md?p=r), as amended in 1966, declares shall be deemed to be performed for a business purpose. Such activities were not regarded as performed for a business purpose under the prior Act and are not so considered under the Act as it was amended in 1966 except for those activities listed in the last sentence of amended [section 3(r)](/cfr/29/3.md?p=r). (See [§ 779.21](/cfr/29/779.21.md).) # §779.215. General scope of terms. - (a) Under the definition related activities performed for a common business purpose will be a part of the enterprise when they are performed either through “unified operation” or “common control.” It should be noted that these conditions are stated in the alternative. Thus if it is established that the described activities are performed through “common control,” it is unnecessary to show that they are also performed through “unified operation,” although frequently both conditions may exist. - (b) Under the definition the terms “unified operation” and “common control” refer to the performance of the “related activities.” They do not refer to the ownership of the activities. Although ownership may be a significant factor in determining control (see [§ 779.222](/cfr/29/779.222.md)), the related activities will be a part of the enterprise even if they are not under common ownership, so long as they are performed for a common business purpose through unified operation or common control. Further, under the definition the terms “unified operation” and “common control” refer to the performance only of the particular related activities and not to other activities which may be performed by the various persons, corporations, or other business organizations, comprising the enterprise. Thus where two or more individual or business organizations perform certain of their activities through unified operation or common control, these activities will be part of a single enterprise, assuming of course they are related activities performed for a common business purpose. Finally, the definition in [section 3(r)](/cfr/29/3.md?p=r) makes clear that the described activities may be performed through unified operation or common control “in one or more establishments or by one or more corporate or other organizational units.” The Senate Report on the 1966 amendments makes the following comment with respect to this: # §779.216. Statutory construction of the terms. The terms “unified operation” and “common control” do not have a fixed legal or technical meaning. As used in the definition, these and other terms must be given an interpretation consistent with the Congressional intention to be ascertained from the context in which they are used, the legislation of which they form a part, and the legislative history. In extending coverage of the Act on an “enterprise” basis, the Congress intended, by the 1961 and 1966 amendments to cover, among others, business organizations and chain store systems which may perform their related activities through complex business arrangements or business structures, whether they perform their activities for a common business purpose through unified operation or through the retention or exercise of control. For these reasons, the definition of the term “enterprise” is stated in broad general terms. This legislative intent is evidenced both by the statements in the Committee Reports and by the definition itself, particularly the broad references to the inclusion in the “enterprise” of “all such activities” whether performed “in one or more establishments” or “by one or more corporate or other organizational units.” When the Act was amended in 1966 the Congress further broadened coverage by redefining an enterprise engaged in commerce or in the production of goods for commerce in [section 3(s)](/cfr/29/3.md?p=s). (See [§ 779.22](/cfr/29/779.22.md).) Where the Congress intended to exclude certain arrangements or activities from the “enterprise” it did so by specific provision under the prior and amended Act. # §779.217. “Unified operation” defined. Webster defines the word “unify” to mean “to cause to be one; to make into a unit; to unite.” The pertinent definition of “operation” is a method or way of operating, working or functioning. Since the term “unified operation” has reference to the method of performing the related activities, it means combining, uniting, or organizing their performance so that they are in effect a single business unit or an organized business system which is an economic unit directed to the accomplishment of a common business purpose. The term “unified operation” thus includes a business which may consist of separate segments but which is conducted or operated as a unit or as a single business for a common business purpose. # §779.218. Methods to accomplish “unified operation.” There are many instances where several establishments, persons, corporations, or other business organizations, join together to perform some or all of their activities as a unified business or business system. They may accomplish such unification through agreements, franchises, grants, leases, or other arrangements which have the effect of aligning or integrating the activities of one company with the activities of others so that they constitute a single business or unified business system. Whether in any particular case the activities are performed through “unified operation” and have the effect of creating a single enterprise, will depend upon all the facts, including the manner in which the activities are performed, the agreements and arrangements which govern their performance, and the other relationships between the parties, considered in the light of the statutory provision and the legislative intent. (cf Wirtz v. Wornom's Pharmacy (E.D. Va.), 18 WH Cases 289, 365; 57 Labor Cases 32,006, 32,030.) # §779.219. Unified operation may be achieved without common control or common ownership. The performance of related activities through “unified operation” to serve a common business purpose may be achieved without common control and without common ownership. In particular cases ownership or control of the related activities may be factors to be considered, along with all facts and circumstances, in determining whether the activities are performed through “unified operation.” It is clear from the definition that if the described activities are performed through unified operation they will be part of the enterprise whether they are performed by one company or by more than one corporate or other organizational unit. The term “unified operation” has reference particularly to enterprises composed of a number of separate companies as is clear in the quotation from the Senate Report in [§ 779.215](/cfr/29/779.215.md). Where the related activities are performed by a single company, or under other single ownership, they will ordinarily be performed through “common control,” and the question of whether they are also performed through unified operation will not need to be decided. (Wirtz v. Barnes Grocer Co., 398 F. 2d 718 (C.A. 8).) # §779.220. Unified operation may exist as to separately owned or controlled activities which are related. Whether there is unified operation of related activities will thus be of concern primarily in those cases where the related activities are separately owned or controlled but where, through arrangement, agreement or otherwise, they are so performed as to constitute a unified business system organized for a common business purpose. For example, a group of separately incorporated, separately owned companies, may agree to conduct their activities in such manner as to be for all intents and purposes a single business system except for the fact that the ownership and control of the individual segments of the business are retained, in part or in whole, by the individual companies comprising the unified business system. The various units may operate under a single trade name; construct their establishment to appear identical; use identical equipment; sell generally the same goods or provide the same type of services, and, in some cases, at uniform standardized prices; and in other respects appear to the persons utilizing their services or purchasing their goods as being the same business. They also may arrange for group purchasing and warehousing; for advertising as a single business; and for standardization of their records, as well as their credit, employment, and other business policies and practices. In such circumstances the activities may well be performed through “unified operation” sufficient to consider all of the related activities performed by the group of units as constituting one enterprise, despite the separate ownership of the various segments and despite the fact that the individual units or segments may retain control as to some or all of their own activities. That this is in accord with the congressional intent is plain, since where the Congress intended that such arrangements shall not bring a group of certain individual retail or service establishments into a single enterprise, provision to accomplish such exception was specifically included. (See [§ 779.226](/cfr/29/779.226.md), discussing the proviso in [section 3(r)](/cfr/29/3.md?p=r) with respect to certain franchise and other specified arrangements entered into between independently owned retail or service establishments and other businesses.) # §779.221. “Common control” defined. Under the definition the “enterprise” includes all related activities performed through “common control” for a common business purpose. The word “control” may be defined as the act of fact of controlling; power or authority to control; directing or restraining domination. “Control” thus includes the power or authority to control. In relation to the performance of the described activities, the “control,” referred to in the definition in [section 3(r)](/cfr/29/3.md?p=r) includes the power to direct, restrict, regulate, govern, or administer the performance of the activities. “Common” control includes the sharing of control and it is not limited to sole control or complete control by one person or corporation. “Common” control therefore exists where the performance of the described activities are controlled by one person or by a number of persons, corporations, or other organizational units acting together. This is clearly supported by the definition which specifically includes in the “enterprise” all such activities whether performed by “one or more corporate or other organizational units.” The meaning of “common control” is discussed comprehensively in [part 776](/cfr/29/part776.md) of this chapter. # §779.222. Ownership as factor. As pointed out in [§ 779.215](/cfr/29/779.215.md) “unified operation” and “common control” do not refer to the ownership of the described activities but only to their performance. It is clear, however, that ownership may be an important factor in determining whether the activities are performed through “unified operation or common control.” Thus common control may exist where there is common ownership. Where the right to control, one of the prerogatives of ownership, exists, there may be sufficient “control” to meet the requirements of the statute. Ownership, or sufficient ownership to exercise control, will be regarded as sufficient to meet the requirement of “common control.” Where there is such ownership, it is immaterial that some segments of the related activities may operate on a semiautonomous basis, superficially free of actual control, so long as the power to exercise control exists through such ownership. (See Wirtz v. Barnes Grocer Co., 398 F. 2d 718 (C.A. 8).) For example, a parent corporation may operate a chain of retail or service establishments which, for business reasons, may be divided into several geographic units. These units may have certain autonomy as to purchasing, marketing, labor relations, and other matters. They may be separately incorporated, and each unit may maintain its own records, including records of its profits or losses. All the units together, in such a case, will constitute a single enterprise with the parent corporation. They would constitute a single business organization under the “common control” of the parent corporation so long as they are related activities performed for a common business purpose. The common ownership in such cases provides the power to exercise the “control” referred to in the definition. It is clear from the Act and the legislative history that the Congress did not intend that such a chain organization should escape the effects of the law with respect to any segment of its business merely by separately incorporating or otherwise dividing the related activities performed for a common business purpose. # §779.223. Control where ownership vested in individual or single organization. Ownership, sufficient to exercise “control,” of course, exists where total ownership is vested in a single person, family unit, partnership, corporation, or other single business organization. Ownership sufficient to exercise “control” exist also where there is more than 50 percent ownership of voting stock. (See West v. Wal-Mart, 264 F. Supp. 168 (W.D. Ark.).) But “control” may exist with much more limited ownership, and, in certain cases exists in the absence of any ownership. The mere ownership of stock in a corporation does not by itself establish the existence of the “control” referred to in the definition. The question whether the ownership in a particular case includes the right to exercise the requisite “control” will necessarily depend upon all the facts in the light of the statutory provisions. # §779.224. Common control in other cases. - (a) As stated in [§ 779.215](/cfr/29/779.215.md) “common control” may exist with or without ownership. The actual control of the performance of the related activities is sufficient to establish the “control” referred to in the definition. In some cases an owner may actually relinquish his control to another, or by agreement or other arrangement, he may so restrict his right to exercise control as to abandon the control or to share the control of his business activities with other persons or corporations. In such a case, the activities may be performed under “common control.” In other cases, the power to control may be reserved through agreement or arrangement between the parties so as to vest the control of the activities of one business in the hands of another. - (b) Activities are considered to be performed under “common control” even if, because of the particular methods of operation, the power to control is only seldom used, as where the business has been in operation for a long time without change in methods of operation and practically no actual direction is necessary; also common control may exist where the control, although rarely visibly exercised, is evidenced by the fact that mere suggestions are adopted readily by the business being controlled. - (c) In the retail industry, particularly, there are many instances where, for business reasons, related activities performed by separate companies are so unified or controlled as to constitute a single enterprise. A common example, specifically named in the definition, is the leased department. This and other examples are discussed in [§§ 779.225 through 779.235](/cfr/29/779.225..779.235.md). # §779.225. Leased departments. - (a) As stated in [section 3(r)](/cfr/29/3.md?p=r) of the enterprise includes “departments of an establishment operated through leasing arrangements.” This statutory provision is based on the fact that ordinarily the activities of such leased departments are related to the activities of the establishment in which they are located, and they are performed for a common business purpose either through “unified operation” or “common control.” A general discussion will be found in [part 776](/cfr/29/part776.md) of this chapter. - (b) In the ordinary case, a retail or service establishment may control many of the operations of a leased department therein and unify its operation with its own. Thus, they may operate under a common trade name: The host establishment may determine, or have the power to determine, the leased department's space location, the type of merchandise it will sell, its pricing policy, its hours of operation and some or all of its hiring, firing and other personnel policies; advertising, adjustment and credit operations, may be unified, and insurance, taxes, and other matters may be included as a part of the total operations of the establishment. Some or all of these and other functions, which are the normal prerogatives of an independent businessman, may be controlled or unified with the store's other activities in such a way as to constitute a single enterprise under the Act. - (c) Since the definition specifically includes in the “enterprise,” for the purpose of this Act, “departments of an establishment operated through leasing arrangements,” any such department will be considered a part of the host establishment's enterprise in the absence of special facts and circumstances warranting a different conclusion. - (d) Whether, in a particular case, the relationship is such as to constitute the lessee's operation to be a separate establishment of a different enterprise rather than a “leased department” of the host establishment as described in the definition, will depend upon all the facts including the agreements and arrangements between the parties as well as the manner in which the operations are conducted. If, for example, the facts show that the lessee occupies a physically separate space with (or even without) a separate entrance, and operates under a separate name, with his own separate employees and records, and in other respects conducts his business independently of the lessor's, the lessee may be operating a separate establishment or place of business of his own and the relationship of the parties may be only that of landlord and tenant. In such a case, the lessee's operation will not be regarded as a “leased department” and will not be included in the same enterprise with the lessor. - (e) The employees of a leased department would not be covered on an enterprise basis if such leased department is located in an establishment which is not itself a covered enterprise or part of a covered enterprise. Likewise, the applicability of exemptions for certain retail or service establishments from the Act's minimum wage or overtime pay provisions, or both, to employees of a leased department would depend upon the character of the establishment in which the leased department is located. Other sections of this subpart discuss the coverage of leased retail and service departments in more detail while subpart D of this part explains how exemptions for certain retail and service establishments apply to leased department employees. # §779.226. Exception for an independently owned retail or service establishment under certain franchise and other arrangements. While certain franchise and other arrangements may operate to bring the one to whom the franchise is granted into another enterprise (see [§ 779.232](/cfr/29/779.232.md)), [section 3(r)](/cfr/29/3.md?p=r) contains a specific exception for certain arrangements entered into by a retail or service establishment which is under independent ownership. The specific exception in [section 3(r)](/cfr/29/3.md?p=r) reads as follows: # §779.227. Conditions which must be met for exception. This exception, in accordance with its specific terms, will apply to exclude an establishment from enterprise coverage only if the following conditions are met: - (a) The establishment must be a “retail or service establishment” as this term is defined in section 13(a)(2) of the Act (see discussion of this term in §§ [779.312](/cfr/29/779.312.md) and [779.313](/cfr/29/779.313.md)); and - (b) The retail or service establishment must not be an “enterprise” which is large enough to come within the scope of section 3(s) of the Act; and - (c) The retail or service establishment must be under independent ownership. # §779.228. Types of arrangements contemplated by exception. If the retail or service establishment meets the requirements in [paragraphs (a) through (c)](/cfr/29/779.227.md?p=a..c) of § 779.227, it may enter into the following arrangements without becoming a part of the larger enterprise, that is, without losing its status as a “separate and distinct enterprise” to which [section 3(s)](/cfr/29/3.md?p=s) would not otherwise apply: - (a) Any arrangement, whether by agreement, franchise or otherwise, that it will sell, or sell only certain goods specified by a particular manufacturer, distributor, or advertiser. - (b) Any such arrangement that it will have the exclusive right to sell the goods or use the brand name of a manufacturer, distributor, or advertiser within a specified area. - (c) Any such arrangement by which it will join with other similar retail or service establishments in the same industry for the purpose of collective purchasing. Where an agreement for “collective purchasing” is involved, further requirements are imposed, namely, that all of the other establishments joining in the agreement must be retail or service establishments under independent ownership, and that all of the establishments joining in the collective purchasing arrangement must be “in the same industry.” This has reference to such arrangements by a group of grocery stores, or by some other trade group in the retail industry. - (d) Any arrangement whereby the establishment's premises are leased from a person who also leases premises to other retail or service establishments. In connection with this rental arrangement, the Senate Report cites as an example the retail establishment which rents its premises from a shopping center operator (S. Rept. 145, 87th Cong., 1st Sess., p. 41). It is clear that this exception was not intended to apply to the usual leased department in an establishment, which is specifically included within the larger enterprise under the definition of [section 3(r)](/cfr/29/3.md?p=r). (See discussion under [§ 779.225](/cfr/29/779.225.md).) # §779.229. 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: # §779.230. Franchise and other arrangements. - (a) There are many different and complex arrangements by which businesses may join to perform their activities for a common purpose. A general discussion will be found in [part 776](/cfr/29/part776.md) of this chapter. The quotation in [§ 779.229](/cfr/29/779.229.md) from the Senate Report shows that Congress recognized that some franchise, lease, or other arrangements have the effect of creating a larger enterprise and whether they do or not depends on the facts. The facts may show that the arrangements are so restrictive as to deprive the individual establishment of those prerogatives which are the essential attributes of an independent business. (Compare Wirtz v. Lunsford, 404 F. 2d, 693 (C.A. 6).) An establishment through such arrangements may transfer sufficient “control” so that it becomes in effect a unit in a unified chain operation. In such cases the result of the arrangement will be to create a larger enterprise composed of the various segments, including the establishment which relinquishes its control. - (b) **The term “franchise” is not susceptible of precise definition.** The extent to which a businessman relinquishes the control of his business or the extent to which a franchise results in the performance of the activities through unified operation or common control depends upon the terms of the contract and the other relationships between the parties. Ultimately the determination of the precise scope of such arrangements which result in creating larger enterprises rests with the courts. # §779.231. Franchise arrangements which do not create a larger enterprise. - (a) While it is clear that in every franchise a businessman surrenders some rights, it equally is clear that every franchise does not create a larger enterprise. In the ordinary case a franchise may involve no more than an agreement to sell the particular product of the one granting the franchise. It may also prohibit the sale of a competing product. Such arrangements, standing alone, do not deprive the individual businessman of his “control” so as to bring him into a larger enterprise with the one granting the franchise. - (b) The portion of the Senate Report quoted in the [§ 779.229](/cfr/29/779.229.md) cites a “bona fide independent automobile dealer” as an example of such a franchise arrangement. (It is recognized that salesmen, mechanics, and partsmen primarily engaged in selling or servicing automobiles, trucks, trailers, farm implements, or aircraft, employed by nonmanufacturing establishments primarily engaged in the business of selling such vehicles to ultimate purchasers are specifically exempt from the overtime pay provisions under [section 13(b)(10)](/cfr/29/13.md?p=b-10) of the Act. [Section 779.372](/cfr/29/779.372.md) discusses the exemption provided by [section 13(b)(10)](/cfr/29/13.md?p=b-10) and its application whether or not the establishment meets the Act's definition of a retail or service establishment. The automobile dealer is used here only as an example of the type of franchise arrangement which, within the intent of the Congress, does not result in creating a larger enterprise.) The methods of operation of the independent automobile dealer are widely known. While he operates under a franchise to sell a particular make of automobile and also may be required to stock certain parts and to maintain specified service facilities, it is clear that he retains the control of the management of his business in those respects which characterize an independent businessman. He determines the prices for which he sells his merchandise. Even if prices are suggested by the manufacturer, it is well known that the dealer exercises wide discretion in this respect, free of control by the manufacturer or distributor. Also the automobile dealer retains control with respect to the management of his business, the determination of his employment practices, the operation of his various departments, and his business policies. The type of business in which he is engaged leaves him wide latitude for the exercise of his judgment and for decisions with respect to important aspects of his business upon which its success or failure depends. On the basis of these considerations, it is evident why the independent automobile dealer was cited as an example of the type of franchise which does not create a larger enterprise encompassing the dealer, the manufacturer or the distributor. Similar facts will lead to the same conclusion in other such arrangements. # §779.232. Franchise or other arrangements which create a larger enterprise. - (a) In other instances, franchise arrangements do result in bringing a dealer's business into a larger enterprise with the one granting the franchise. Where the franchise arrangement results in vesting control over the operations of the dealer's business in the one granting the franchise, the result is to place the dealer in a larger enterprise with the one granting the franchise. Where there are multiple units to which such franchises have been granted, the several dealers are considered to be subject to the common control of the one granting the franchise and all would be included in the same larger enterprise. - (b) It is not possible to lay down specific rules to determine whether a franchise or other agreement is such that a single enterprise results because all the facts and circumstances must be examined in the light of the definition of the term “enterprise” as discussed above in this subpart. However, the following example illustrates a franchising company and independently owned retail establishments which would constitute a single enterprise: - (1) The franchisor had developed a system of retail food store operations, built up a large volume of buying power, formulated rules and regulations for the successful operation of stores together constituting a system which for many years proved in practice to be of commercial value to the separate stores; and - (2) The franchisor desired to extend its business through the operation of associated franchise stores, by responsible persons in various localities to act as limited agents, and to be parts of the system, to the end that the advantages of and the profits from the business could be enjoyed by those so associated as well as by the franchisor; and - (3) The stores were operated under the franchise as part of the general system and connected with the home office of the franchisor from which general administrative jurisdiction was exercised over all franchised stores, wherever located; and - (4) The stores operated under the franchise agreement were always subject to the general administrative jurisdiction of the franchisor and agreed to comply with it; and - (5) **The stores operated under the franchise agreed to install appliances, fixtures, signs, etc.** according to plans and specifications provided by the franchisor and to purchase their merchandise through the franchisor except to the extent that the latter may authorize local purchase of certain items; and - (6) The stores operated under the franchise agreed to participate in special promotions, sales and advertising as directed by the franchisor, to attend meetings of franchise store operators and to pay a fee to the franchisor at the rate of one-half of 1 percent of total gross sales each month for the privileges to them and the advantages and profits derived from operating a local unit of the franchisor's system; and - (7) The franchisor under the franchise agreement had the right to place on a prohibited list any merchandise which it considered undesirable for sale in a franchise store, and the stores operated pursuant to the franchise agreed to immediately discontinue sale of any such blacklisted merchandise. - (c) It is clear from the facts and circumstances surrounding this franchise arrangement described in [paragraph (b)](#b) of this section that the operators of the franchised establishments are denied the essential prerogatives of the ordinary independent businessman because of restrictions as to products, prices, profits and management. The last paragraph of the Senate Report quoted in [§ 779.229](/cfr/29/779.229.md) makes clear that in such cases the franchised establishment, dealer, or concessionaire will be considered an integral part of the related activities of the enterprise which grants the franchise, right, or concession. # §779.233. Independent contractors performing work “for” an enterprise. - (a) The definition in [section 3(r)](/cfr/29/3.md?p=r) specifically provides that the “enterprise” shall not include “the related activities performed for such enterprise by an independent contractor.” This exclusion will apply where the related activities are performed “for” the enterprise and if such activities are performed by “an independent contractor.” This provision is discussed generally in [part 776](/cfr/29/part776.md) of this chapter. - (b) **The Senate Report in referring to this exception states as follows—** - (c) There are many instances in industry where one business performs activities for separate businesses without becoming a part of a larger enterprise. In addition to the examples cited in the Report they may include such services as repairs, window cleaning, transportation, warehousing, collection services, and many others. The essential test in each case will be whether such services are performed “for” the enterprise by an independent, separate enterprise, or whether the related activities are performed for a common purpose through unified operation or common control. In the latter case the activities will be considered performed “by” the enterprise, rather than “for” the enterprise, and will be a part of the enterprise. The distinction in the ordinary case will be readily apparent from the facts. In those cases where questions arise a determination must be made on the basis of all the facts in the light of the statute and the legislative history. # §779.234. Establishments whose only regular employees are the owner or members of his immediate family. [Section 3(s)](/cfr/29/3.md?p=s) provides that any “establishment which has as its only regular employees the owner thereof or the parent, spouse, child, or other member of the immediate family of such owner” shall not be considered to be an “enterprise” as described in [section 3(r)](/cfr/29/3.md?p=r) or a part of any other enterprise. Further the sales of such establishment are not included for the purpose of determining the annual gross volume of sales of any enterprise for the purpose of [section 3(s)](/cfr/29/3.md?p=s). The term “other member of the immediate family of such owner” is considered to include relationships such as brother, sister, grandchildren, grandparents, and in-laws but not distant relatives from separate households. The 1966 amendments extended the exception to include family operated establishments which only employ persons other than members of the immediate family infrequently, irregularly, and sporadically. (See general discussion in [part 776](/cfr/29/part776.md) of this chapter.) # §779.235. Other “enterprises.” No attempt has been made in the discussion of the term “enterprise,” to consider every possible situation which may, within the meaning of [section 3(r)](/cfr/29/3.md?p=r), constitute an “enterprise” under the Act. The discussion is designed to explain and illustrate the application of the term in some cases; in others, the discussion may serve as a guide in applying the criteria of the definition to the particular fact situation. A more complete discussion is contained in [part 776](/cfr/29/part776.md) of this chapter.