December 6, 2021

Volume XI, Number 340

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December 03, 2021

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It’s Summer! Is Your Local Amusement Park or Recreational Establishment Exempt From The FLSA’s Minimum Wage and Overtime Requirements?

Summer is here, which presents the perfect opportunity to discuss one the Fair Labor Standards Act’s lesser-known exemptions, the seasonal amusement or recreational establishment exemption.

Conceptually, the exemption is straightforward: an amusement or recreational establishment does not have to comply with minimum wage and overtime regulations if it satisfies one of two tests: 1) it does not operate for more than seven months in a calendar year; or 2) during the preceding calendar year, its average receipts for any six months of that year were not more than 33 1/3 per cent of its average receipts for the other six months of the year.

Recent cases have shed light on this exemption. Last August, the Second Circuit decided Chen v. Major League Baseball Props., 798 F.3d 72 (2d Cir. 2015), which we discussed here.  Although MLB itself fails both tests for this exemption, the Court concluded that an employer’s “distinct physical place of business” may satisfy the exemption tests even if the parent entity does not.  Thus, MLB’s FanFest—a five-day festival held during All-Star weekend—was not required to pay its volunteers minimum wage or overtime pay.

The Chen decision made sense in part because of the nature of the volunteers’ duties (greeting customers, answering questions, distributing gifts, etc.) and the number of hours worked (Chen worked only 14 total hours). A recent case, however, better tested the scope of the exemption. Morales v. 22nd District Agricultural Assn., 2016 Cal. App. LEXIS 573 (Cal. App. 4th Dist. July 13, 2016).

In Morales, the defendant operated the Del Mar Fairgrounds and Del Mar Horsepark, two distinct facilities.  The plaintiffs were seasonal employees who were permitted to work unlimited hours for up to 119 days per year.  Despite this scope of work, the California Appellate Court nonetheless concluded—consistent with federal precedent—that it was not the nature of the employees’ work that determined whether the exemption was satisfied, but rather the nature of the employer’s revenue-producing activities.

The Morales case highlights how misunderstood the exemption often is. The court applied a three-part, conjunctive test to determine whether the Fairgrounds and Horsepark constituted a single establishment—the same test rejected by the Second Circuit in Chen.  The appellants had not challenged the lower court’s application of that test, which yielded an appellate decision that seemingly contradicts Chen: the Morales court deemed the Del Mar Fairgrounds and Del Mar Horsepark, which are located on separate parcels of land, were a single establishment.

The Chen decision provides employers with a powerful tool to protect seasonal amusement or recreational establishments. This decision remains the best guidance available to employers, althoughthe Morales case reminds us that in addition to physical separation, substantive separation—different executive leadership, boards of directors, accounting staffs, human resources departments, and so forth—will help preserve employers’ ability to create separate amusement or recreational establishments that are exempt from the FLSA’s minimum wage and overtime rules.

Jackson Lewis P.C. © 2021National Law Review, Volume VI, Number 210
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About this Author

David Salazar-Austin, Jackson Lewis Law Firm, Employment Attorney
Principal

David C. Salazar-Austin is a Principal in the Hartford, Connecticut, office of Jackson Lewis P.C. He represents employers in all aspects of employment litigation, and has represented clients in state and federal court, in arbitration, and before administrative agencies including the Connecticut Commission on Human Rights and Opportunities, the Equal Employment Opportunity Commission, the Connecticut Department of Labor, and the State of Connecticut Workers’ Compensation Commission.

He has experience in a variety of...

860-331-1552
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