MLB Under Attack On All Sides For Failing To Pay Mimimum Wage

Major League Baseball may still enjoy immunity from federal antitrust laws, but that immunity doesn’t mean the league or its teams can ignore federal and state laws that require employees be paid a minimum wage.

So say several lawsuits and other legal actions filed against MLB and several teams in the last year. The latest lawsuit, filed last week in federal court in San Francisco, could significantly change the economics of the league were it to succeed. In that case, three former minor league players filed a complaint against MLB, the Giants, Marlins and Royals on behalf of 6,000 current and former minor leaguers claiming that minor league salaries violate federal and state wage and hour laws.

Last summer, a volunteer at All-Star Week festivities in New York sued MLB in federal court in Manhattan for violations of federal and state wage and hour laws. He claimed that he provided services for which he should have been paid at least the minimum wage. The case is pending.

And the federal Department of Labor is investigating the Giants and the Marlins for failing to pay team interns a minimum wage. It’s the second DOL investigation of the Giants. Last year, San Francisco settled a claim by DOL that the team had underpaid clubhouse attendants who often worked long hours for less than minimum wage and didn’t receive overtime pay. The Giants paid more than $500,000 to resolve claims involving 74 clubhouse workers.

DOL’s investigation of the team’s internship programs comes during a time of heightened scrutiny of unpaid internships. The department issued new guidelines in April 2010 limiting the definition of an intern to people: participating in a program primarily for educational purposes, for the benefit of the intern; who didn’t displace paid workers; who didn’t perform duties that benefited the company; and who didn’t expect a job offer at the end of the internship. A court decision in 2012 holding that two unpaid interns on the movie Black Swan should have been paid at least the federal minimum wage has unleashed a wave of litigation against media companies by current and former interns.

According to a report on FairWarning, the investigations involving the Giants have MLB officials worried and prompted league COO Rob Manfred to send a memo to all teams in September with a reminder of the importance of complying with federal and state wage and hour laws (FairWarning obtained a copy of the memo, which you can read here). MLB then invited representatives from DOL to meet with team executives during the Winter Meetings in Orlando in December. Those meetings did take place, according to a person familiar with the situation.

The claims by interns and volunteers pale in comparison, however, to those asserted last week by the three former minor league players. The 50-page complaint (link here) details the long hours of training, practicing and playing demanded of minor leaguers in return for a below-poverty level salary — somewhere between $3,000 to $7,500 for a five-month season. By contrast, the minimum salary for a major league player is $500,000. A few high profile draft picks are rewarded with million-dollar signing bonuses, but those are the exceptions, not the rule, the complaint asserts.

The collective bargaining agreement between MLB and the MLBPA governs a good portion of a minor leaguer’s working conditions, even though he’s not a member of the MLBPA and has no way of influencing the negotiations. Several efforts over the years to form a minor league players union have failed.

The legal claims are based on the Fair Labor Standards Act (FLSA), the federal statute that creates a national floor of wage protection for workers. Employers must pay employees the minimum wage for a 40-hour work work and time-and-a-half for overtime. The federal minimum wage is $7.25 per hour. State laws can and often are more generous to employees, both in setting the minimum wage and in defining the groups of employees covered by the wage protection provisions. The complaint asserts claims under California, Arizona, Florida, North Carolina and New York law. All of those states but North Carolina have minimum wages higher than $7.25 per hour.

The key battle in the lawsuit will come down whether minor league ballplayers are covered by the FLSA and similar state statutes or are they considered exempt employees. You can read the full list of statutory exemptions to the FLSA here. The exemption most likely to come into play is for employees of certain seasonal amusement or recreational “establishments.” Indeed, in the volunteer/All-Star Week lawsuit, MLB filed a motion to dismiss the complaint and argued that “professional sports events are amusement or recreational establishments under the FLSA. My quick review of the case law suggests this a fact-intensive inquiry — i.e., not one easily resolved by a court on an early motion to dismiss.

MLB will also fight hard to keep the court from certifying the case either as a class action or as one for “collective action” under the FLSA. Once certified, the plaintiffs who file the lawsuit prosecute the case on behalf of themselves and other similarly-situated employees. Obviously, the stakes are much higher — and the potential damages much greater — if the claims relate to 6,000 minor league players and not just the three who originally filed the lawsuit.

One particularly interesting aspect of the case involves the plaintiffs’ attorneys. Garrett Broshius, who played in the Giants’ minor league system for several years, is now a lawyer and player agent based in St. Louis. While in the minor leagues, he wrote a regular column for Sporting News on life in the minors and maintained a personal blog where he critiqued the working conditions faced by minor league players. His firm is one of two representing the plaintiffs. The other firm is a small, well-regarded litigation boutique based in San Francisco with experience in prosecuting class actions and antitrust claims.

Wage and hour law was not my area of expertise when I practiced law. But after reviewing the complaint, the statute and recent case law, it appears to me that the minor league players have an interesting and substantive case and one that won’t be easily or quickly dismissed by the court.