In order for an employer to be subject to the requirements of the Fair Labor Standards Act (FLSA), there are certain hoops that must be jumped through. One of those hoops is often referred to in legal circles as the “enterprise coverage prong.” In a recent case out of the Eleventh Circuit, an employee challenged the meaning of “enterprise coverage” in an attempt to maintain his lawsuit for alleged violations of the Fair Labor Standards Act. However, the employer claimed it was not subject to the statute under the circumstances and the courts agreed.
Employee’s work status
In Rodriguez v. Gold Star, Inc., Juan Rodriguez was a valet who parked cars for his employer at three locations in Miami Beach. Unlike other employees, he only parked the cars. He did not retrieve them, wash them, distribute and collect tickets or answer phones. Rodriguez worked 100 hours each week, on average, but claimed he was not paid overtime.
Determining whether an employee is protected under the FLSA
Under the FLSA, an individual employee is protected by the Act if their job requires them to engage in commerce and the production of goods for commerce. If an individual employee is not covered, they could still be protected if their employer is a covered entity under the act’s enterprise coverage provision. Under the provision, an employer with at least two employees is subject to the Act if the employer:
- Has employees who are either engaged in commerce or in the production of goods for commerce, or
- Has employees handling, selling or working on goods or materials that have been moved in or produced for commerce by any person; and,
- Has at least $500,000 of annual gross volume of sales made or business done.
How is the term “goods” defined by the Act?
Under the FLSA, “goods” are defined as products, commodities, wares, merchandise or articles of commerce of any character, or any part or ingredient thereof. The term does not, however, include goods after they have been delivered into the actual physical possession of the consumer. This is referred to as the “ultimate consumer” exception,” and is typically used as a defense for certain businesses. The Eleventh Circuit has held that, with respect to this exclusion, the definitions of “goods” and “materials” are mutually exclusive. More importantly, the ultimate consumer exception applies only to “goods.”
Was the employee covered in Rodriguez v. Gold Star, Inc.?
In the case of Rodriguez v. Gold Star, Inc., the employee asserted that his employer was covered under the “handling clause” of the “enterprise coverage prong.” According to Rodriguez, the cars he parked should be considered interstate “materials” under the
terms of the statute. This left the Court to analyze the meaning of “materials” under the Act.
Are the cars in this case considered “materials?”
While it was true that Rodriguez “handled” the cars, which “have been moved in or produced for commerce,” and it was undisputed that the sales volume threshold was met in this case, the court determined that the real issue was whether the cars could actually be considered “materials.” The case was dismissed by the trial court, which decided that Rodriguez was not covered because the cars Rodriguez parked were "goods," not "materials."
The Eleventh Circuit agreed on appeal. Specifically, the Eleventh Circuit held that since the cars were "goods," and the ultimate consumer exception excluded from the category of covered "goods" the handling of the cars at issue here. Accordingly, the court affirmed the judgment.
The cars were actually considered “goods”
In Rodriguez v. Gold Star, Inc., the court discussed the meaning of the term “materials,” rejecting the “coming to rest” doctrine. Because the Court held that the cars Rodriguez parked were “goods,” not “materials,” the ultimate consumer exception excluded the handling of the cars. Consequently, Rodriguez’s case was dismissed.
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