On January 15, 2021, the Wage and Hour Division (WHD) of the US Department of Labor issued opinion letter FLSA2021-3. The letter explores the scope of Section 13 (a)(3) of the Fair Labor Standards Act (FLSA), which creates an exemption from the minimum wage and overtime provisions for “an employee employed by an establishment which is an amusement or recreational establishment, organized camp, or religious or non-profit educational conference center.” In addition to meeting this definition, an entity must satisfy either a “calendar test” or a “receipts test,” designed to limit the exemption to employees of truly seasonal operations.
Examining three different entities, the WHD concluded as follows:
- In order to be an “establishment” under Section 13 (a)(3) of the FLSA, an entity must have a distinct physical location for its recreational operations. An entity that organizes and leads nature walks, hikes, daytrips, and overnight camping trips for children does not meet this definition. The entity has a recreational character and purpose. However, it maintains an office solely for administrative purposes; its trips do not meet, leave from, or return to that office. Therefore, its recreational operations do not have a “distinct physical location” over which it exerts control as required to satisfy the “establishment” exemption.
- A non-profit religious ministry that runs a year-round camp/ retreat center and uses an accrual method of accounting cannot satisfy the “receipts” test under Section 13 (a)(3) of the FLSA. To qualify for the exemption, an entity must show that during the preceding calendar year, its average receipts for any six months of the year were not more than 33 ⅓ percent of its average receipts for the other six months of that year (of note, the months need not be consecutive). For purposes of the FLSA exemption, “receipts” means money actually received and does not incorporate accrual accounting principles. Furthermore, “receipts” under Section 13 (a)(3) refers to money received in exchange for goods or services and does not include charitable donations.
- An entity that plans and produces thousands of events at various locations each year for companies, non-profits, and other organizations is not an “establishment” under Section (a)(3) of the FLSA. While it maintains a warehouse and administrative offices, it does not exert control, even for a limited period, over fixed locations that have amusement or recreational character. It simply helps produce events on premises that are held and controlled by its clients.
While WHD opinion letters can provide valuable guidance to covered employers, they are based upon the facts of the specific case presented. Therefore, the scope of their legal impact is often uncertain. Employers whose seasonal employees may qualify for the “amusement or recreational establishment” exemption should work closely with legal counsel to determine whether the exemption is likely to apply.
We continue to closely monitor developments in this area and will provide you with important updates.
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