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Thursday, May 29, 2014
Pro Sports Teams and the Fair Labor Standards Act

The professional sports industry has recently seen a wave of minimum wage and overtime lawsuits filed under the Fair Labor Standards Act (FLSA).  Michael McCann previously discussed one of these cases, Senne v. Office of the Commissioner of Baseball, a class action suit alleging that minor league baseball players are effectively paid below the minimum wage when the total number of hours most players work per year are taken into account.  Similarly, various groups of NFL cheerleaders have filed lawsuits against their teams (including the Buffalo Bills, Cincinnati Bengals, New York Jets, Oakland Raiders, and most recently, the Tampa Bay Buccaneers), also alleging that they are effectively paid less than the federally guaranteed minimum wage of $7.25 per hour.  Meanwhile, a separate class action lawsuit was filed last year against MLB on behalf of unpaid volunteers at the annual FanFest convention held in conjunction with the All-Star Game each year.  Fear of a similar lawsuit reportedly motivated the NFL to begin paying what had in previous years been unpaid volunteers at this year's Super Bowl.

One legal issue that will need to be resolved in these lawsuits is whether the professional sports industry is exempt from the FLSA's minimum wage and maximum hour requirements under Section 213(a)(3), a provision covering seasonal amusement and recreational establishments.  Under the exception, any business providing amusement or recreational services to the public may pay its employees a sub-minimum wage (without overtime) should one of the following two conditions exist: either (a) the business does not operate for more than seven months in any calendar year, or (b) the business's receipts from its six lowest revenue months in the previous year were less than 33 1/3% of its receipts in its six highest revenue months (e.g., the business's receipts from April-September were at least three times greater than its receipts from October-March).

While sports franchises clearly provide amusement or recreational services, it is less certain whether they satisfy the exception's seasonality requirement.  Professional sports teams hoping to claim seasonal exempt status under the FLSA will likely have to rely on the first condition under Section 213(a)(3).  Indeed, because teams tend to receive a significant percentage of their revenues during the off-season (from season ticket deposits, television broadcast agreements, sponsorship deals, etc.), they typically will not satisfy the six-month receipts requirement set forth in Section 213(a)(3)(b).  See Bridewell v. Cincinnati Reds, 155 F.3d 828 (6th Cir. 1998) "Bridewell II").

Meanwhile, courts are split regarding the status of professional sports teams under Section 213(a)(3)(a)'s seven-month operation provision.  Two of the three courts to consider the issue to date have held that sports franchises effectively operate year-round, and therefore do not qualify for the FLSA's seasonal exception.  For example, in Bridewell v. Cincinnati Reds, 68 F.3d 136 (6th Cir. 1995) ("Bridewell I"), a group of stadium maintenance employees sued the Cincinnati Reds alleging that the team had failed to pay them overtime as required under the FLSA.  The team asserted that it was exempt from the law because its season ran seven months (including spring training).  The 6th Circuit rejected this argument, concluding that the team was a year-round business.  In particular, the court noted that the team's operations extended beyond just the playing season, as evidenced by the fact that the Reds employed nearly 120 people on a year-round basis.  As a result, the appellate court concluded that the team was subject to the FLSA.

Similarly, the Eastern District of Louisiana held that the NBA's New Orleans Hornets were likewise subject to the FLSA in a suit brought by former ticket sales and fan relations employees.  In Liger v. New Orleans Hornets, 565 F.Supp.2d 680 (E.D. La. 2008), the court concluded that the Hornets were not exempt under Section 213(a)(3)(a) because the totality of their operations lasted more than seven months.   In particular, the court stressed that the Hornets' season could potentially last as long as nine months if pre-season and post-season games were considered, while also noting that the team participated in the NBA Draft each June.  Moreover, the court emphasized the fact that the Hornets employed 100 or more employees on a year-round basis.

However, at least one court has held that that a professional sports franchise was a seasonal operation exempt from the FLSA.  In Jeffery v. Sarasota White Sox, 64 F.3d 590 (11th Cir. 1995), a grounds keeper for a minor league baseball team sued the franchise for unpaid overtime.  The 11th Circuit rejected the challenge, holding that the team was exempt from the FLSA.  In particular, the court stressed that the proper focus under Section 213(a)(3)(a) was on the duration of the team's amusement and recreational-related operations themselves, not the fact that some of its employees may be employed on a year-round basis.  Consequently, because the minor league team's season only ran for five months, the court held that the franchise was not required to pay overtime.   Undoubtedly hoping to take advantage of this precedent, the MLB defendants in the Senne minor league wage lawsuit filed a motion to transfer the case from California to the Middle District of Florida (the original site of the Jeffery litigation) last week.

Thus, the status of professional sports teams under the FLSA is currently unsettled.  Should the courts in the pending lawsuits follow the Bridewell and Liger precedents, then it appears that the defendant professional sports franchises will be subject to the FLSA.  However, if future courts were to follow the Jeffery v. Sarasota White Sox precedent, then the applicability of the exemption would likely vary by league depending on the duration of its playing season.  In fact, a court could even determine that the status of teams in the same league differs depending upon whether the franchise qualified for the playoffs the year before. Given the number of suits currently pending, we will likely receive additional clarification from the courts on this issue in the near future.


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