Many agencies offer seasonal recreational services during the summer months, such as swimming pools, beaches and summer camps. If you operate seasonal recreational services, the employees you hire may be exempt from minimum wage and overtime requirements. Read on:
A.) What is the Recreational Employees Exemption?
The recreational employees exemption in the Fair Labor Standards Act (“FLSA”) exempts from overtime and minimum wage requirements employees working at an amusement or recreational establishment, organized camp or religious or non-profit educational conference center.
The term “establishment” refers to a “distinct physical place,” such as a golf course, summer camp or swimming pool operation of an agency’s recreation and parks department. To qualify for the exemption, the establishment must meet one of the following seasonal requirements:
- The establishment does not operate for more than seven months in any calendar year (if an establishment engages only in such activities as maintenance or ordering supplies during the “off season,” it is not considered to be operating for purposes of the exemption); or
- The establishment’s receipts for any six months of the preceding calendar year do not exceed one third of its average receipts for the other six months of that year.
Because the statute’s language refers to receipts for any six months (not necessarily consecutive months), the monthly average based on total receipts the months in which the receipts were the least should be tested against the monthly average for six other months when the receipts were largest to determine whether this test is met. To illustrate:
An amusement or recreational establishment operated for nine months in the preceding calendar year. It was closed January, February, and December. The total receipts for May, June, July, August, September and October (the six months in which the receipts were largest) totaled $260,000, for a monthly average of $43,333. The total receipts for the other six months totaled $75,000, a monthly average of $12,500. Because $75,000 is less than one third of $260,000, the exemption would apply.
B.) What if my Agency Hires the Same Employees to Perform both Seasonal and Non-Seasonal Work?
The application of the recreational employees exemption is complicated when an agency either: (1) hires a seasonal employee for less than seven months to perform both seasonal and non-seasonal services; or (2) has a year round employee perform seasonal recreational services for less than seven months, and perform other non-seasonal services for the remainder of the year. In both of these instances, the exemption may be inapplicable.
The U.S. Department of Labor (“DOL”) issued an administrative letter ruling in 1974 that, where employees engage at the same time in non-seasonal activities, such as cleaning city streets, in additional to their seasonal work, they do not qualify for the exemption for the non-seasonal work. However, they would retain the exemption for the recreation work during the less than seven-month season. The DOL did not address whether the hours performing seasonal work would be combined with the hours performing non-seasonal work in determining the amount of any overtime that might be due if the employee works hours more than 40 in any workweek.
In an administrative letter issued by the DOL in 1975, it opined with regard to a City that employed seasonal beach lifeguards that “the lifeguards on the beach and other employees engaged solely in work connected with the operation of the beach” came within the exemption.
In an administrative letter issued in 1999, the DOL held with regard to a seasonal golf course operated by a City that only those employees who were exclusively employed at the golf course came within the terms of the exemption.
Finally, in a 2009 administrative letter, the DOL expressed the view that seasonal lifeguards employed at a local beach open for less than seven months of the year qualified for the exemption. However, the DOL stated: “We assume for purposes of this letter that these individuals are employed by the town exclusively as lifeguards at the beach, which is open to the public for lifeguard-protected swimming for less than seven months of the year, and that they are not employed by the town in any other capacity.”
Based on the guidance from the DOL, our advice is the following:
- If, for example, during the summer an employee works only at an agency’s pool and the pool is open for seven months or less (or otherwise qualifies for the exemption based on its gross receipts), it would be lawful for the agency not to pay the employee time and one-half for overtime hours worked and/or pay the employee less than minimum wage.
- If the employee works both at the pool and also performs non-seasonal job duties in the same work period, the employee should be paid overtime for any hours worked over 40 in a workweek, regardless of which job duties are performed in the excess hours.
- Finally, if an employee works year round for the agency, and performs recreational work on a seasonal basis (e.g. at the pool) and then is employed in another capacity during the off-season (e.g. cleaning streets), the employee would not qualify for the exemption from minimum wage and overtime requirements.
C.) Guidance on Hiring Recreational Employees
When hiring employees on a seasonal basis who qualify for the recreational establishment exemption, we suggest the following steps:
- Agencies should require employees who work on a seasonal basis in an establishment which is an amusement or recreational establishment or an organized camp to sign a document acknowledging that they are not entitled to overtime because their job falls within the FLSA recreational establishment exemption.
- Agencies should place a notification in the job description telling employees that they are subject to the recreational establishment exemption and therefore are not entitled to overtime unless they work elsewhere in the City and their total hours worked exceed 40 in a week.
D.) A Note to Private Companies and Non-Profit Organizations
Private companies and non-profits organizations must also satisfy the California Labor Code requirements in order for the recreational establishment exemption to apply. Labor Code section 1182.4(a) provides that student employees, camp counselors and program counselors at organized camps are exempt from state minimum wage and overtime requirements if they earn weekly pay of at least 85% of the minimum wage for a 40 hour work week, regardless of the number of hours actually worked, or at least 85% of the minimum wage for the actual number of hours worked if less than 40. Public agencies are not subject to this requirement.