Appellate Court Sides with MLB in Minimum Wage Lawsuit

Major League Baseball’s pay practices have faced a series of legal challenges in recent years. The most notable of these cases center around allegations that MLB teams routinely fail to pay minor-league players in accordance with the Fair Labor Standards Act (FLSA), the nation’s primary minimum wage and overtime law.

While the minor-league wage lawsuits have certainly generated the most attention to date, they were not the first in the recent wave of minimum-wage cases filed against MLB over the last few years. Instead, that distinction belongs to Chen v. Major League Baseball, a lawsuit alleging that MLB violated the FLSA by employing unpaid volunteers to work at the annual FanFest convention held in conjunction with the All-Star Game in New York City back in 2013.

The district court granted MLB an initial victory in the Chen case last year, determining that FanFest was not subject to the FLSA and therefore was immune from the federal minimum wage and overtime requirements. Now, in a recent decision issued earlier this month, MLB has scored yet another victory with the Second Circuit Court of Appeals affirming the trial court’s finding that the FLSA does not apply to FanFest.

However, while the Chen decision certainly represents an important decision with respect to the rights of FanFest volunteers, the appellate court’s recent opinion appears unlikely to have a significant impact on the other minimum-wage lawsuits pending against the league. Therefore, the various lawsuits challenging both MLB’s minor league and scout pay practices remain very much alive despite the recent rulings in the FanFest case.

The appellate court based its recent decision in the FanFest case on a relatively obscure provision in the FLSA, Section 213(a)(3), which states that seasonal “amusement or recreational establishments” — typically those that operate seven months or less per year — are not subject to the law’s minimum wage or overtime provisions.

In particular, MLB had argued that the 2013 FanFest at issue in the case qualified as a seasonal establishment under Section 213(a)(e) since it lasted five days, and clearly provided patrons with amusement or recreational services. Thus, MLB argued, FanFest was immune from the FLSA’s minimum wage and overtime requirements.

Conversely, the plaintiff contended that FanFest was more properly viewed as being a part of MLB’s operations as a whole. And since the league itself operated for more than seven months in 2013, Chen asserted that FanFest could not qualify as an exempt seasonal establishment under the law.

The appellate court agreed with MLB’s interpretation of the law. In particular, the court emphasized the fact that FanFest was held at a physically separate location — New York’s Javits Center — that was removed from MLB’s central league offices. As a result, under the applicable legal precedents, the Second Circuit concluded that FanFest was a separate, stand-alone establishment for purposes of Section 213(a)(3), and thus that MLB was legally entitled to pay its FanFest workers a sub-minimum wage (or, in this case, no wages at all).

As those closely following both the minor league and scout minimum wage lawsuits may note, MLB has asserted (or is likely to assert) this same defense under Section 213(a)(3) in those cases as well. So, at first glance, one might wonder whether this new decision foreshadows the ultimate resolution of MLB’s other pending minimum wage lawsuits as well (especially since the scout lawsuit — like the FanFest case — was filed in New York court).

Fortunately for the plaintiffs in the other cases, the recent decision in the FanFest suit is unlikely to affect future courts’ determination of whether Section 213(a)(3) applies in either the minor league or scouting contexts. Specifically, the plaintiffs in the other lawsuits will be able to assert that FanFest represents a vastly different form of legal “establishment” than those that are at issue in the other cases, arguably rendering Section 213(a)(3) inapplicable to those lawsuits.

Unlike the FanFest case — in which the plaintiffs directly worked for a short-term, physically separate convention — the relevant “establishments” in the minor league and scouting cases are the 30 MLB teams themselves. And unlike FanFest, these teams arguably operate year-round — conducting various business functions throughout the off-season — and therefore are not as clearly “seasonal” in nature as was the FanFest convention at issue in the Chen lawsuit.

So the plaintiffs in the other pending minimum-wage lawsuit can credibly contend that their cases present markedly different facts than those relied on by the appellate court to exempt FanFest from the FLSA.

To be sure, MLB will argue in opposition that even if its teams maintain some business operations during the off-season, in most cases their actual provision of amusement or recreational is limited to seven months or less in duration, thus qualifying them as seasonal establishments under Section 213(a)(3) in the other lawsuits. Indeed, courts have previously differed regarding how to properly characterize the duration of an MLB team’s operations under the FLSA. Nevertheless, considering the many functional differences between MLB franchises and FanFest, the appellate court’s recent decision in the Chen suit is unlikely to have much of a bearing on how courts resolve that same question in the other cases.

As a result, the ultimate impact of the recent appellate court decision in the FanFest case is likely to be rather modest. Going forward, MLB can now be fairly confident that it is not required to pay volunteers working at future FanFests either the minimum wage or overtime. And potentially, the league could even argue that this same precedent should apply to other short-duration events managed by MLB, such as the All-Star Game itself, the World Series, or the World Baseball Classic.

But the FanFest decision is unlikely to foreshadow the resolution of whether this same defense will apply to the minor league or scout minimum wage lawsuits. While the courts in those cases may ultimately reach the same conclusion as the Second Circuit regarding the applicability of Section 213(a)(3), those judges are unlikely to rely on the appellate court’s recent decision due to the significant differences between an MLB team’s operations and FanFest.

We hoped you liked reading Appellate Court Sides with MLB in Minimum Wage Lawsuit by Nathaniel Grow!

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Nathaniel Grow is an Associate Professor of Business Law and Ethics at Indiana University's Kelley School of Business. He is the author of Baseball on Trial: The Origin of Baseball's Antitrust Exemption, as well as a number of sports-related law review articles. You can follow him on Twitter @NathanielGrow. The views expressed are solely those of the author and do not express the views or opinions of Indiana University.

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srpst23
Member
srpst23

But doesn’t baseball amuse and entertain fans from mid-February through the end of October/beginning of November? By my count that is more than 7 months.

Eric R
Guest
Eric R

That was addressed in the write-up. Chen made that claim and MLB says it is independent of the baseball season:

“The appellate court agreed with MLB’s interpretation of the law. In particular, the court emphasized the fact that FanFest was held at a physically separate location — New York’s Javits Center — that was removed from MLB’s central league offices. As a result, under the applicable legal precedents, the Second Circuit concluded that FanFest was a separate, stand-alone establishment for purposes of Section 213(a)(3), and thus that MLB was legally entitled to pay its FanFest workers a sub-minimum wage (or, in this case, no wages at all).”


That said, those workers are described as “unpaid volunteers”. Unless MLB told the people that they were being paid and then didn’t, unsure why those folks would expect to be paid. When I volunteered to help staff my companies annual e-cycle day, I was not expecting to be paid for my time.

DD
Guest
DD

I think you missed srpst23’s point. The assertion is that from spring training to the end of the world series is longer than 7 months.

Eric R
Guest
Eric R

That was in there too…

“Conversely, the plaintiff contended that FanFest was more properly viewed as being a part of MLB’s operations as a whole. And since the league itself operated for more than seven months in 2013, Chen asserted that FanFest could not qualify as an exempt seasonal establishment under the law.”

WilsonOnHouse
Member
WilsonOnHouse

Video content on MLB.com is viewable year round and as such, is a magnet for ad revenue for MLB.com. This excludes the fact that MLB.tv subscribers can view content year-round. Can MLB actual say that from all their revenue streams, they only receive revenue seven or fewer months out of the year? And my question is based on revenue flow defining “operate”; one can be less restrictive and say that MLB operates year-round, based on their presence on the web and via other media. If MLBAM, mlb.tv and mlb.com are all separate from MLB, inc., then I think there is a case to be made that those entities do not necessarily fall under MLB’s anti-trust exemption as they are NOT in the “business of giving exhibitions of baseball, which are purely state affairs.” How could anti-trust laws apply to MLBAM, mlb.tv, mlb.com, etc?

Doug Lampert
Guest
Doug Lampert

The fact that MLB teams do SOMETHING year round, doesn’t mean that they’re not seasonal entertainment enterprises. (The fact that paid games happen more than 7 months a year on some years might.)

A water park that closes down for the winter and is open only 5 months a year will still do SOMETHING the rest of the time, pay a watchman or two and do maintenance work if nothing else, and worker training is also likely to take some “off-season” time.

Yet if summertime park workers aren’t covered by this exemption, then who is? And having an online shop that sells park t-shirts year round wouldn’t change this.

The exemption has to be intended to cover SOMEONE, and seasonal parks and fairs seem most likely, but such organizations have some full time employees. The full time employees are almost certainly covered (their part of the business is not seasonal), but that doesn’t make the entire business and all employees non-seasonal.

Seriously, if something like fan-fest weren’t covered, what would be? I help run a very small 3-day annual convention, we STILL have meetings year round and conduct some business year round, you can’t just stop an activity cold and then start from nothing half a year later.

Your child’s little league district organization is doing stuff year round, is little league not seasonal entertainment? Should all coaches be paid at least minimum wage because they are employees? I’ll bet they even raise money (by taking donations if nothing else) year round.