FLSA Recreational or Amusement Establishment Exemption Includes Baseball Theme Park Event: Second Circuit | Practical Law

FLSA Recreational or Amusement Establishment Exemption Includes Baseball Theme Park Event: Second Circuit | Practical Law

In Chen v. Major League Baseball Properties, Inc., the US Court of Appeals for the Second Circuit held that the 2013 Major League Baseball All-Star Game's "FanFest" event taking place in New York over a five-day period fell within the Fair Labor Standard Act's (FLSA) recreational or amusement establishment exemption, and that the term "establishment" in the exemption means a distinct, physical place of business. The Second Circuit affirmed the district court's dismissal of a minimum wage claim brought by a volunteer at the event.

FLSA Recreational or Amusement Establishment Exemption Includes Baseball Theme Park Event: Second Circuit

by Practical Law Labor & Employment
Published on 18 Aug 2015 • USA (National/Federal)
In Chen v. Major League Baseball Properties, Inc., the US Court of Appeals for the Second Circuit held that the 2013 Major League Baseball All-Star Game's "FanFest" event taking place in New York over a five-day period fell within the Fair Labor Standard Act's (FLSA) recreational or amusement establishment exemption, and that the term "establishment" in the exemption means a distinct, physical place of business. The Second Circuit affirmed the district court's dismissal of a minimum wage claim brought by a volunteer at the event.
On August 14, 2015, in Chen v. Major League Baseball Properties, Inc., the US Court of Appeals for the Second Circuit held that the 2013 Major League Baseball (MLB) All-Star Game's "FanFest" event taking place in New York over a five-day period fell within the FLSA's recreational or amusement establishment exemption, and that the term "establishment" in the exemption means a distinct, physical place of business. The Second Circuit affirmed the district court's dismissal of a minimum wage claim brought by a volunteer at the event. (No. 14-1315-CV, (2d Cir. Aug. 14, 2015).)

Background

In July 2013, MLB organized an interactive theme park event in New York in conjunction with the MLB All-Star game. The event, known as "FanFest," took place over a five-day period and included various baseball-related activities for fans. MLB staffed the event primarily with volunteers, who were compensated by being given free admission to FanFest, a chance to win tickets to the All-Star game, and various apparel and other items including t-shirts and baseball caps. The volunteers were not paid any monetary compensation.
John Chen, one of the approximately two-thousand individuals who volunteered at FanFest, sued MLB in US district court, seeking minimum wage pay on behalf of himself and others who volunteered at the event. After Chen moved to certify an FLSA collective action, the district court dismissed Chen's lawsuit, finding that FanFest was an establishment covered by the FLSA's recreational or amusement establishment exemption and therefore was excluded from the FLSA's minimum wage requirements.
Chen appealed to the Second Circuit, claiming that MLB (an entity not covered by the exemption) and FanFest were together a single establishment under the FLSA. Therefore, according to Chen, he and the other Fanfest volunteers were due minimum wage pay for all hours they worked during the event.

Outcome

The Second Circuit affirmed the district court's dismissal of Chen's claim, holding that:
  • The term "establishment" in the recreational or amusement establishment exemption means a distinct, physical place of business, and not an integrated multiunit business or enterprise.
  • FanFest fell within the FLSA's recreational or amusement establishment exemption and therefore volunteers at the event were not due minimum wage.
The Second Circuit noted that:
  • Section 13(a)(3) of the FLSA exempts from the FLSA's minimum wage and overtime requirements seasonal amusement and recreational establishments that do not operate for more than seven months in a calendar year (29 U.S.C. § 213(a)(3)).
  • The FLSA does not define the term "establishment" and the legislative history of the exemption does not offer sufficient guidance on the meaning of the term "establishment."
  • Current DOL regulations define "establishment" for Section 13(a) purposes as a distinct, physical place of business and not as an entire enterprise encompassing multiple places of business (29 C.F.R. § 779.23).
  • No other circuit court of appeals has directly addressed the definition of "establishment."
The Second Circuit analyzed the Supreme Court's interpretation of "establishment" in a separate repealed exemption, finding that:
  • Congress used the term "establishment" in the retail establishment exemption to mean a distinct, physical place of business (A.H. Phillips, Inc. v. Walling, 324 U.S. 490, 496 (1945); Mitchell v. Bekins Van & Storage Co., 352 U.S. 1027, 1027 (1957)).
  • There was no basis to conclude that Congress intended the term "establishment" to mean:
  • The US DOL's multi-prong test for distinguishing whether two separate portions of a business were more than one establishment for FLSA exemption purposes was not applicable to seasonal-based FLSA exemptions like the recreational or amusement establishment exemption.
  • FanFest qualified for the recreational or amusement establishment exemption because it was:
    • a single establishment, taking place at a location separate from MLB's offices and from other All-Star game-related events;
    • seasonal because it lasted less than seven months; and
    • recreational because it was a sports-related fan gathering promoted like a theme (or amusement) park.
In validating MLB's affirmative defense that FanFest was an establishment covered by the FLSA's recreational or amusement establishment exemption, the Court did not reach the issue of whether plaintiff was an employee under the FLSA.

Practical Implications

The Second Circuit's decision in Chen clearly establishes a distinct, physical place of business as the definition of the term "establishment" for purposes of applying the recreational or amusement establishment exemption. MLB's FanFest event was atypical in a number of ways, not least of which that it used volunteers to staff many of the activities and itself surrounded a major event that takes place only once a year. It remains to be seen whether the new definition of "establishment" will be applied in any other contexts or other circuits.