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New overtime rule might be out at the plate
Minor league baseball teams possibly exempt
Jim Juliano - Fall 2004

Many companies were thrown a curve ball recently when the Fair Labor Standards Act (FLSA) was changed to bring more employees in under the overtime umbrella. At least some minor league baseball teams, however, appear to be safe at home with a complete exemption from overtime requirements.

In general, the FLSA requires an employer to pay time and a half for hours worked in excess of 40 hours per week, unless the employer or the employee falls within an exemption. Section 213(a) of the act provides several exemptions, including for executives, administrative and professional employees and outside salespersons who exercise independent judgment in their jobs.

These employees must also earn a certain amount of money to be exempt from overtime pay, and the new change to the FLSA, which has generated a fair amount of publicity, raised that threshold salary requirement to $455 per week, or $23,660 per year, from considerably lower pay rates. The bottom line is that a new group of employees—those who earn more than the previous threshold salary and up to $455 per week—are now eligible for overtime pay, even if they exercise independent judgment as executives, administrative or professional employees or as outside salespersons.

But some teams might not have to worry about overtime issues for any employees. That’s because the teams themselves may be exempt from the overtime provisions of the law.

Section 213(a)(3) of the FLSA exempts all employees— not only executives, managers, administrators and outside salespersons—from minimum wage and overtime provisions if the employer passes two tests. The first test is whether the employer is an “amusement or recreational establishment.” According to a federal appeals court opinion involving the Detroit Tigers, a business that runs baseball games qualifies as an amusement or recreational establishment.

A team must also meet either of two additional tests to be exempt. The first requires that the team operate for seven or fewer months in any calendar year. Case law conflicts on this test: One federal appeals court found that the Cincinnati Reds operated year-round, but another found that the Sarasota White Sox satisfied the fewer-than-seven-months rule, even though certain maintenance and other front office functions took place all year.

Alternatively, a team can meet an average receipt test. The employer is exempt from overtime requirements if its average receipts for any six months of the preceding calendar year are not more than a third of its average receipts for the other six months of the year. An examination of a team’s cash flow will show if this test is met.

Overtime rules under the FLSA still apply to most other businesses. Check with legal counsel to make sure your team complies with the rules.

 

 

 
 
 
 
 

This website contains general information that should not be considered legal advice or legal opinion concerning individual situations. Legal counsel should be consulted for specific advice.

Copyright 2004 by L. James Juliano Jr.
Legally Speaking® is a registered trademark of the law practice of L. James Juliano Jr.