While Danny Zuko and Sandy may have had themselves a blast during those summer lovin’ months, this may be a good time for your agency to take a look at the FLSA “recreational establishment” exemption. This is a unique exemption that will exempt those employees working at “recreational establishments” from the traditional overtime threshold of 40 hours per week.
The United States Department of Labor (“DOL”) has defined an establishment as a “distinct physical place of business” and not necessarily the entire business or enterprise. In so doing, the DOL has also opined that the following may be recreational establishments, even when operated by a public agency: stadiums, golf courses, swimming pools, summer camps, ice skating rinks, zoos, beaches, and boardwalk facilities. In other words, your entire agency does not have to qualify as a recreational establishment, but it can be a distinct business within your agency, such as a swimming pool or a summer camp.
If your agency operates a “recreational establishment,” then employees who are employed solely for the purposes of the operation of the recreational establishment may be exempt from the FLSA. For example, seasonal employees hired to operate a swimming pool that only operates for the summer may be exempt. On the other hand, an employee who is employed by your agency, who happens to work at the recreational establishment during its limited operation, will likely not qualify.
The key inquiry in determining whether this exemption applies is whether your agency is operating a “recreational establishment.” The FLSA exempts:
any employee employed by an establishment which is an amusement or recreational establishment, organized camp, or religious or non-profit educational conference center, if (A) it does not operate for more than seven months in any calendar year, or (B) during the preceding calendar year, its average receipts for any six months of such year were not more than 33 ⅓ per centum of its average receipts for the other six months of such year. (29 U.S.C. § 213(a)(3).)
The reasoning behind this exemption is that recreational establishments have a “particular character” that may require longer hours in a shorter season.
First Way to Qualify: the establishment does not operate for more than seven months in any calendar year
Simply look at how many months in a year the establishment operates. If the establishment is closed for more than seven months, then it will qualify as a “recreational establishment.” Examples might be a pool that only operates in the summer or an ice skating rink that only operates in the winter.
It should be noted that this timing requirement is applied to the establishment, not the employee. In other words, seasonal employees do not qualify for the “recreational establishment” exemption because they only work for three months a year. For example, a lifeguard who is only hired for the three months that a City pool is open may qualify because the City pool only operates for three months, not because she is only being hired for three months.
Second Way to Qualify: average receipts for any six months were more than 33 1/3 % of establishment’s average for the other six months of the year.
This will require a little math, but it is relatively straightforward. The establishment can operate year-round, and if any six months of receipts are one-third of the other six months, then it can qualify. Examples of this might be pools, in which you charge admission that experiences sharp peak seasons and slack seasons.
The key here is “receipts.” The word receipt suggests that there is a specific cost to the consumer that is being collected by the establishment, e.g., admission fees. In other words, we would not use the cost of the monthly electricity bill to calculate “average receipts.”
FLSA audit is an effective method for proactively ensuring that an agency understands and meets all necessary obligations under the statute. Visit our website to see whether you need to schedule an FLSA Compliance Audit for your agency.