|April 16, 2014|
Previously published on April 9, 2014
On March 26, 2014, the District Court for the Southern District of New York dismissed John Chen’s proposed Fair Labor Standards Act (FLSA) collective action against Major League Baseball (MLB) alleging that MLB had failed to pay him and all other All-Star Week FanFest volunteers the minimum wage. In Chen v. Major League Baseball, et al., the court held that volunteers, who had worked at MLB’s FanFest experience at the Jacob Javits Convention Center in New York City, were not entitled to minimum wage because the FLSA exempts from its minimum wage provisions individuals who perform services for an “amusement or recreational establishment.”
In July 2013, MLB’s All-Star Game took place at Citi Field in New York City. In connection with the game, MLB put on FanFest, “the largest interactive baseball theme park in the world” at the Javits Center. MLB staffed FanFest with unpaid volunteers for the five-day event. The only remuneration the volunteers received was “in-kind benefits,” including sporting goods, free admission to FanFest, and a chance to win tickets to the All-Star Game. The volunteers attended a mandatory one-hour information session at Citi Field and a two-hour orientation at the Javits Center. Among other tasks, the volunteers (a collective class that potentially numbered as many as 2,000) stamped fans entering the FanFest, directed attendees around FanFest, and worked at various stations in the Javits Center.
According to the complaint, the FLSA required MLB to pay its FanFest volunteers a minimum wage for their work. In defense, MLB argued that “volunteers” are not covered under the FLSA because section 13(a)(3) states that the minimum wage provisions “shall not apply with respect to . . . any employee employed by an establishment which is an amusement or recreational establishment . . . if . . . it does not operate for more than seven months in any calendar year.” Because MLB and the volunteers agreed that baseball constituted “amusement or recreation” for purposes of the exemption, the disagreement as to the applicability of section 13(a)(3) centered on the meaning of the term “establishment.”
Although the FLSA does not define “establishment,” the court relied on the legislative history of section 13(a)(3) and U.S. Department of Labor (DOL) regulations defining the term in the context of the FLSA. According to the legislative history, the exemption was meant to cover seasonal or recreational or amusement activities, such as amusement parks, circuses, sports events, or other similar or related activities. DOL regulations defined “establishment” as “a ‘distinct physical place of business’ rather than . . . ‘an entire business or enterprise’ which may include several separate places of business.”
The court rejected the volunteers’ contention that they had been employed by MLB, not FanFest. In doing so, the court accepted the contention that MLB was a single, integrated enterprise and that FanFest was the establishment that had employed the volunteers. The court emphasized that an enterprise, such as MLB, might consist of many establishments and that it made no difference that MLB “coordinated or controlled” the events of All-Star Week because “physical distinctness, rather than operation or control, is what distinguishes an ‘enterprise’ from an ‘establishment’ to which it may belong.” Additionally, the court stated that it was of no consequence that the volunteers had been employed by MLB rather than FanFest, because “an individual is employed by the establishment at which he works, regardless of the enterprise that may operate or control the establishment.” The court also rejected the volunteers’ argument that because prior courts had found sports franchises to be establishments, it followed that MLB should be an establishment as well and that its year-long operation took it outside of the exemption. Here, however, the court relied on its prior reasoning and stated that FanFest was a distinct location that had operated less than a week. Accordingly, the court found that the complaint facially demonstrated that the volunteers had worked for an amusement or recreational establishment that operated for fewer than eight months and that therefore section 13(a)(3) applied.
While unpaid volunteers and interns working for sports leagues or franchises may be subject to minimum wage requirements, sports leagues or franchises with separate and distinct establishments utilizing volunteers, may find some refuge in section 13(a)(3) of the FLSA. The holding in this case reinforces the principle that within the amusement and recreational field, volunteers remain exempt from the FLSA wage requirements for performing work at separate establishments, even if those establishments are controlled and coordinated by a greater corporate entity.
Finally, it should be noted that this issue is still unsettled under the New York Labor Law (NYLL), as the court dismissed the volunteers’ NYLL claims without prejudice for lack of jurisdiction.