Recreational Establishments Hit a Grand Slam Against Minimum Wage

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When at a baseball game, or riding a roller-coaster, or skiing down a slope, or relaxing at a summer camp, few people are likely to spend time contemplating minimum wage or premium pay for overtime work.  Thanks to a recent decision by a federal appellate court, many seasonal and recreational establishments and related enterprises now have even less reason to worry about such things.  Specifically, the U.S. Court of Appeals for the Second Circuit (“Second Circuit”) ruled on August 14, 2015, that certain such establishments may take advantage of an exemption under the Fair Labor Standards Act (“FLSA”) even if they are part of a larger business.

In John Chen v. Major League Baseball Properties, Inc., Case No. 14‐1315‐cv, the Second Circuit was called upon to determine whether individuals who served as volunteers at the 2013 Major League Baseball All Star Weekend FanFest were entitled to minimum wage.  The FanFest was “a five‐day ‘interactive baseball theme park’ organized in conjunction with Major League Baseball’s 2013 All‐Star Week” held at a convention center a couple miles away from Major League Baseball’s headquarters, according to the Second Circuit’s decision.

Among other things, the FanFest event included baseball‐themed video games, a simulated baseball dugout and fields, baseball clinics, batting cages, and autograph signing.  Major League Baseball staffed FanFest and other All‐Star Week events that year with roughly 2,000 volunteers, including the plaintiff, John Chen (“Chen”).  Those volunteers carried out various duties, including greeting customers, answering questions and providing directions, taking tickets, checking credentials, and distributing gifts.

Prior to the FanFest event, Chen allegedly attended three hours of mandatory information and orientation sessions at various locations, including the site of the All‐Star Game and the site of the FanFest event.  In the course of volunteering three shifts at the FanFest event, Chen worked approximately fourteen hours.  During those shifts, Chen said he performed various services, including stamping the wrists of attendees, handing out bags of baseball paraphernalia, placing paper flyers in bags, directing attendees to the exits, alphabetizing liability waivers, and working at a fielding station where he instructed attendees to deposit the balls they fielded into buckets.

Thereafter, Chen filed a putative collective action lawsuit (i.e., a lawsuit on behalf of himself and other unnamed plaintiffs who allegedly were similarly situated) in a federal court in New York City.  In that lawsuit, Chen claimed that he and other volunteers should have been paid minimum wage for their work at FanFest.

Chen alleged that he and other volunteers both expected and received compensation from Major League Baseball, but the compensation they were paid did not meet the minimum wage required under the FLSA.  For example, Chen claimed that he and other volunteers were given free admission to events, t‐shirts, caps, drawstring backpacks, fanny packs, water bottles, baseballs, lanyards, and a chance to win a pair of tickets to the All‐Star Game – but the value of those freebies did not add up to the minimum wage they should have been paid.

When it got up to bat before the courts, Major League Baseball tried to load the bases by arguing that Chen was not an employee for purposes of the FLSA.  Ultimately, however, Major League Baseball’s homerun came from its argument that FanFest was exempt from the FLSA’s minimum wage requirements under 29 U.S.C. § 213(a)(3), since it is a seasonal amusement or recreational establishment.

Because the parties agreed that the FLSA exemption did not apply to Major League Baseball, Chen’s attorneys pitched that the FanFest and Major League Baseball “are a single establishment for purposes of the FLSA.”  Chen’s lawyers hoped to score points by advocating for the application of a multi-prong test used by the U.S. Department of Labor to determine whether a business unit is a separate establishment.  That test would have analyzed not only the physical separation between Major League Baseball’s facilities and the location of the FanFest, but also whether FanFest operates separately and whether its employees are shared with Major League Baseball.

The Second Circuit counted those arguments as strikes, ruling that recreational establishments may take advantage of the FLSA exemption, even though they are part of a larger enterprise, so long as they are a “distinct, physical place of business.”  Since FanFest took place at a convention center some distance away from the headquarters of Major League Baseball, the Second Circuit said that “[t]his physical separation is determinative.”

The Second Circuit’s ruling is fairly technical.  Moreover, it is not binding on federal courts in other parts of the United States, but confined to federal courts in Connecticut, New York, and Vermont.  Nonetheless, the rationale in the Second Circuit’s decision may be persuasive to courts in other parts of the country while providing meaningful guidance to employers who have multiple establishments that may qualify for the exemption.  Employers who wish to explore this or other wage-and-overtime exemptions should consult with legal counsel.

Contributor: Brendan J. Begley, Attorney at Law | Weintraub Tobin