When small and medium-sized businesses are sued under the Fair Labor Standards Act, a common litigation issue is whether or not the defendant-employer – or the plaintiff-employee – is covered under the Act, through either its broad “enterprise coverage” or “individual coverage” of the worker’s employment. Where enterprise coverage is not present, typically because the business does not have the requisite $500,000 in gross revenues, the question becomes whether the individual employee is covered due to his or her work impacting “interstate commerce.” Rejecting applicability of individual coverage to an employee of a Queens, New York tire repair center, Eastern District of New York Judge Nicholas G. Garaufis ruled on summary judgment that testimony that the Plaintiff occasionally utilized the business’ credit card machine to ring up customers did not mean he was participating in “interstate commerce.” Owusu v. Corona Tire Shop, 2013 U.S. Dist. LEXIS 55381 (E.D.N.Y. Apr. 15, 2013).

Plaintiff Owusu worked as an automobile tire changer, changing and repairing tires in New York for New York customers. Defendant’s management witnesses testified that plaintiff did occasionally use the credit card machine. Plaintiff, seizing upon this testimony, and citing an old USDOL opinion letter, argued the use of the credit card machine invariably involved interstate commerce. Judge Garaufis rejected this argument because “[e]vidence that an employee sometimes engaged in an activity that can be considered interstate commerce, such as bank transactions or mail delivery, is not sufficient to show that the employee was ‘in the channels of commerce’ rather than merely affecting commerce.” The occasional credit card use was not a “substantial part” of Plaintiffs’ work, thus FLSA coverage did not attach. Id., at *11-12 citing Locke v. St. Augustine's Episcopal Church, 690 F. Supp. 2d 77 (E.D.N.Y. 2010).

Disputing FLSA coverage can be a defense strategy for a small business faced with an FLSA claim, and an important aspect of strategy even in states where state law provides broader protection. Small businesses and their counsel must analyze coverage issues and, where appropriate, seek to adjudicate such issues at the outset of a litigation in an effort to conserve resources.