playballCo-authored by Laura E. Reasons and Noah A. Finkel

Last week, the Second Circuit affirmed a lower court decision in Chen v. Major League Baseball Properties, Inc., et al., holding that FanFest—a five-day interactive baseball theme park organized in conjunction with Major League Baseball’s 2013 All-Star Week and held at the Javits Center in New York City—is an “establishment” for purposes of the FLSA’s seasonal amusement or recreational establishment exemption, 29 U.S.C. § 213(a)(3).

John Chen volunteered to work at FanFest. He attended a three-hour training, then worked 14 hours over three shifts. Like other volunteers, Chen was not paid minimum wage for his work. Instead, he was provided a t-shirt, cap, drawstring backpack, water bottle, and a baseball. Chen sued, arguing that he should have been paid minimum wage for the time he worked at FanFest. The Defendants moved for dismiss, arguing that FanFest volunteers, like Chen, are exempt from the FLSA’s minimum wage requirements under the seasonal amusement or recreational establishment exemption.

29 U.S.C. § 213(a)(3) provides an exemption from the FLSA’s minimum wage and overtime requirements for:

Any employee employed by an establishment which is an amusement or recreational establishment, organized camp, or religious or non-profit educational conference center, if

(A) it does not operate for more than seven months in any calendar year, or

(B) during the preceding calendar year, its average receipts for any six months of such year were not more than 33 1/3 per centum of its average receipts for the other six months of such year.

The Chen appeal centered around the meaning of the word “establishment.” Chen argued that, although FanFest took place at the Javits Center, he was actually an employee of Major League Baseball and the Office of the Commissioner of Baseball, so the relevant “establishment” should include all operations of those entities. If that were the case, the exemption would not have applied since Major League Baseball and the Commissioner of Baseball do not operate seasonally, as defined by clauses (A) or (B) of § 213(a)(3).

But the court rejected Chen’s arguments. Instead, it held that Fanfest at the Javits Center is the relevant “establishment.” Since FanFest was only a 5-day long event, it clearly meets the “seasonal” requirement of clause (A).

In so holding, the court relied on case law, the legislative history, and DOL regulations that define “establishment” as a “distinct physical place of business,” as opposed to “an entire business or enterprise” which may include several places of business. 29 C.F.R. § 779.23.

The court quickly disposed of Chen’s argument that FanFest was not an establishment for the purposes of recreation or amusement. Indeed, amusement parks and sporting events are the very types of establishments to which the exemption is intended to apply. The Second Circuit agreed with the district court that FanFest was a “sports event” and noted that the Complaint itself described FanFest as a “theme park.”

Practice Pointers and Typical Problems

  • Employers intending to rely on the seasonal amusement or recreational exemption who operate across various physical locations must take care to define the relevant “establishment”—a discrete, physical location—and analyze the exemption accordingly. Unrelated operations at different locations of the same employer, likely won’t destroy the exemption at the relevant “establishment.” But employers arguably may not rely on the exemption for employees not working at the physical “establishment,” even if they provide support to operations at that establishment.
  • It is simplest to show that the establishment is “seasonal,” if it operates for 7 months or less during the calendar year. Limited operations during the off-season (such as holding private events in a stadium, or deploying a limited crew for maintenance or to prepare for the season), will not necessarily destroy the exemption. Nevertheless, if an employer is relying on clause (B) of the exemption, it must carefully aggregate and compare its receipts for the slower 6 months to the rest of the year. Also note, that the 6 months need not be consecutive.
  • In comparing receipts under clause (B), an employer may need to look beyond its own receipts. For example, if a court found a stadium was the relevant “establishment,” it might require analysis of the aggregated receipts of different corporate entities including entities such as a baseball club, a souvenir vendor, and concessionaires or restaurants within the establishment. As a practical matter, employers should consider if and how they will prove the exemption, including cooperation that may be needed from other unaffiliated companies with whom they have a business relationship because they operate within the same “establishment.”
  • Special care should be taken if an employer hires the same individuals to perform seasonal work and non-seasonal work (either at the same time, or in the off-season).
  • Consider state minimum wage and overtime laws and their exemptions, many of which vary, and some of which may lack anything like the seasonal establishment exemption.
  • Finally, application of the exemption is complicated and employers should work closely with counsel to determine the intricacies of whether the it applies to their establishment (particularly if they plan to rely on clause (B)).