Whither the Independent Leagues?

Last week, Congress passed — and President Trump’s signed into law — the Save America’s Pastime Act as part of the omnibus spending bill funding the operation of the federal government for the foreseeable future. As Sheryl Ring and I each noted last week, the act created a new exemption to the federal minimum-wage and maximum-hour laws applying to minor-league baseball players.

Specifically, under the new provision that went into effect on Friday, so long as Major League Baseball pays its minor leaguers the federal minimum wage for 40 hours per week during the regular season, the players will not be entitled to any additional pay for overtime or offseason work under federal law.

Although most commentators initially focused on the effect the provision is likely to have on those playing for one of MLB’s affiliated minor-league teams, Baseball America’s J.J. Cooper noted last week that the new exemption could have dire implications for teams belonging to non-MLB-affiliated, so-called independent minor leagues (such as the American Association, Atlantic League, Frontier League, and Pacific Association). Yahoo’s Jeff Passan expressed a similar concern on Monday, while SB Nation’s Marc Normandin argued that these independent teams deserve to go out of business if they cannot afford to pay their most important employees the minimum wage.

Undoubtedly, the obligation to pay players the minimum wage would likely impose a financial hardship on many independent-league teams. But it’s not at all clear that that will actually be the end result of the Save America’s Pastime Act.

To begin, nothing in the text of the new law affirmatively requires that minor-league baseball players receive the minimum wage. Instead, the provision merely specifies that the normal federal minimum-wage and overtime rules will not apply to minor-league players who are paid $7.25 per hour for 40 hours each week during their teams’ regular playing season.

So this means that independent minor-league teams that fail to pay their players the minimum wage remain in exactly the same position in which they were situated prior to the passage of the Save America’s Pastime Act. By paying players less than $290 per week, independent-league teams would fall outside the safe harbor created by the new provision and thus be at risk of being sued for their pay practices.

But that doesn’t necessarily mean those pay practices are in violation of the law; independent minor-league teams have always had a credible argument that they were covered by another exception to the federal minimum-wage and overtime rules.

Specifically, even before the Save America’s Pastime Act, independent minor-league teams arguably fell within a different exception under the minimum-wage laws — namely, one applying to seasonal amusement or recreational businesses. Under Section 213(a)(3) of the Fair Labor Standards Act, any business providing amusement or recreational services to the public that operates for seven months or less per year needn’t pay its employees the minimum wage or overtime.

This has been one of the defenses on which MLB has relied in the ongoing minor-league wage litigation. Ultimately, however, the applicability of this exemption to MLB and its affiliated minor leagues is uncertain. Because MLB teams are the actual employers of their minor-league players, the length of each MLB team’s operations would determine the applicability of the seasonal exemption to their businesses. (The applicability of the seasonal exemption is based on the duration of the employer’s operations, not the length of a specific employee’s job obligations.)

If one were to focus only on the length of a team’s regular playing season, many MLB teams would arguably fall within the law’s seven-month cut-off. However, because these teams also run a couple months’ worth of spring-training operations, along with maintaining significant business activity during the offseason, federal courts have largely (but not unanimously) held that the exemption doesn’t apply to professional sports teams in cases involving the Cincinnati Reds and the NBA’s then-New Orleans Hornets.

While the applicability of the seasonal exemption to MLB teams is thus questionable — helping to explain the league’s decision to pursue the new statutory exemption in Congress — the case for an independent minor-league team’s qualification as a seasonal business is much stronger. For starters, the total length of these leagues’ playing seasons will almost always run less than seven months. The Frontier League is operating from May to September this year, for instance, while the Atlantic League’s season is set to run from April to September.

Perhaps even more importantly, these independent leagues’ offseason operations are significantly less extensive than those of teams in MLB. There is no Pacific Association Network devoted to discussing and marketing the independent league on a 24/7 basis on cable television, for instance. Nor do independent teams typically generate substantial merchandising revenues, or conduct significant marketing activities, during the offseason.

That having been said, the applicability of the seasonal exemption to independent minor-league baseball has never been conclusively determined by a court. (A minimum-wage lawsuit was filed against the Frontier League in 2016, but that case settled a little under a year later, before the judge had issued any substantive rulings in the case.)

To be sure, one could argue that the enactment of the Save America’s Pastime Act undercuts any future reliance on the seasonal exemption by independent minor-league teams. As the argument goes, if minor-league teams were already clearly excused from the minimum-wage and overtime laws under the seasonal exemption, there would be no need for Congress to have passed an additional law specifically excluding minor-league players from these protections.

While it’s certainly possible a court could adopt this reasoning in a future case against an independent league, it is also entirely plausible that courts would find that the enactment of the Save America’s Pastime Act did not affect the potential applicability of the seasonal exemption to independent minor leagues. Indeed, the language of the seasonal exemption is itself pretty straightforward: so long as a recreational business operates seven months or less per year, it is exempt from the federal minimum-wage and overtime requirements.

Moreover, there could certainly be cases in which a team might not qualify for the seasonal exemption — such as for the reasons discussed above with respect to the applicability of the law on MLB teams, for instance — but in which Congress still wished to partially shield the team from paying its minor leaguers overtime benefits. From a court’s perspective, this could help explain why Congress would have felt the need to pass additional protections for minor-league baseball despite the existence of the seasonal exemption. In other words, just because Congress passed a specific exemption for MLB doesn’t mean the legislature wished to strip professional baseball teams of any additional protection for which they may qualify under the seasonal exemption (which could still apply to the rest of a minor-league teams’ non-player employees, for instance).

So while the legal status of independent minor-league teams remains somewhat unsettled under the federal minimum-wage and maximum-hour laws, there’s no particular reason to believe that the Save America’s Pastime Act has meaningfully altered things in that regard. Ultimately, the independent leagues’ pay practices will likely rise or fall based on the applicability of the seasonal recreation exemption, not the new provision implemented by Congress last week.

Nathaniel Grow is an Associate Professor of Business Law and Ethics and the Yormark Family Director of the Sports Industry Workshop 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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6 years ago

I worked for an independent baseball team as a intern in 2016. Not only is the pay for the players a problem, but also the office employees. Granted, I was an intern, but I worked between 60-100 hours a week over there and made around $1.35 per hour. Even the full time employees were paid below minimum wage, but they did made commission (Even still, they only made around $16,000 a year).

Everything about the business of independent baseball was simply broken. At least the players can make minimum wage now, but the employees need to as well.

6 years ago
Reply to  czelasko

Why do people work for those teams if they are so dissatisfied with the pay?

6 years ago
Reply to  johansantana17

It’s for experience. The opportunity to work in the MLB, or possibly another sport. I know an intern before I came in became part of the marketing team for the Florida Panthers and was behind the “Spacey in Space” promotion that was popular a couple years ago

6 years ago
Reply to  czelasko

Makes sense. When I was a season ticket holder for a minor league hockey team, I learned my handler accepted a position with the Florida Panthers.

6 years ago
Reply to  johansantana17

The same reason that anybody works for anybody if that’s the best they can get.
Just out of interest, why are you asking?

6 years ago
Reply to  czelasko

I wonder how many of these employees have some sort of direct association with the team or its owner beyond the employment relationship.