“Take me out to the ballgame
Take me out with the crowd
Buy me some peanuts and Cracker Jacks
I don’t care if I never get back…”
Since 1908 (incidentally, the last year a certain Chicago team won the World Series), baseball fans have regularly sung this anthem as part of the stadium experience.
What nobody could have anticipated at the time, however, was how to treat the employees who sell those peanuts, Cracker Jacks, and team-related gear. Recently, in the midst of the playoffs, the Second Circuit clarified that stadium workers who provided concessions at Oriole Park are exempt from overtime under the FLSA as employees of an “amusement or recreational establishment.” Hill v. Del. N. Cos. Sportservice, Inc., No. 15-2109 (2d Cir. 10/3/16).
As those who have been to Camden Yards in recent years may know, food and beverage sales had been handled by the ARAMARK Company until November 2010. At that time, Maryland Sportservice, Inc., a subsidiary of Delaware North Companies (DNC) Sportservice, reached an agreement with the Baltimore Orioles Limited Partnership to provide concessions to Oriole Park. (For legal purposes, Oriole Park is defined to include both the baseball stadium itself and the Warehouse building, along with the Eutaw Street walkway.) Maryland Sportservice handles the concession stands inside the stadium and also manages the Orioles Team Store and Dempsey’s Brew Pub and Restaurant.
William Hill and Tanica Brown each worked for Maryland Sportservice for several months in 2011. Bringing a lawsuit, they claimed that they were forced to work more than 40 hours each week but were illegally denied overtime. Maryland Sportservice explained that it had classified Hill, Brown, and similarly situated employees as exempt seasonal employees under the “amusement or recreational establishment” exception. See 29 U.S.C. § 213(a)(3). The district court agreed with Maryland Sportservice and granted the company summary judgment. Hill and Brown appealed.
The Second Circuit affirmed the district court’s decision, albeit on different grounds. Finding the phrase “amusement or recreational establishment” ambiguous, the court observed that “[t]he food, drink, and merchandise that Maryland Sportservice sells at Oriole Park are predominately for baseball game attendees’ use and consumption as they watch the game, and they enhance the amusement or recreational value of watching the game.” The court also drew from legislative history – specifically, Congress had stated in a 1961 House Report that “[t]hese establishments are typically those operated by concessionaires at amusement parks and beaches and are in operation for 6 months or less a year.” This amusement-park-and-beach example was repeated in the FLSA regulations. Thus, the court concluded, concessionaires may be amusement or recreational establishments even if they are distinct from the establishment (here, the baseball stadium) itself. The court then defined concessionaires, for purposes of the exemption, as “establishments whose purpose is to sell goods and services on the premises of an amusement or recreational host facility to the host’s customers for their use or consumption on the host’s premises as they participate in the host’s amusement or recreational activities.”
Applying this definition, the court held that Maryland Sportservice’s operations made it a concessionaire. The key, according to the court, was that the primary purpose of the business operations was “selling food, drink, and Orioles merchandise to customers of Oriole Park for their consumption and use as they participate in watching the baseball games held there.”
The court further held that Maryland Sportservice’s operations were sufficiently seasonal to qualify for the exemption. An entity is exempt as an “amusement or recreational establishment” only “if (A) it does not operate for more than seven months in any calendar year” (the “operations test”) or “(B) during the preceding calendar year, its average receipts for any six months of such year were not more than 33 1/3 [%] of its average receipts for the other six months of such year” (the “receipts test”). 29 U.S.C. § 213(a)(3).
Acknowledging that Maryland Sportservice had over 600 employees during April-September (baseball season), and as few as 12 employees between October and March, the court nevertheless ruled that because customers did not need baseball tickets to go to Dempsey’s, for example, during the off-season, it could not be said that Maryland Sportservice was not operational during the off-season.
On the other hand, Maryland Sportservice passed the receipts test. Even when combining the receipts of ARAMARK and Maryland Sportservice (because Maryland Sportservice started operations in November 2010), the least busy six months of 2010 (January-March, plus October-December) produced less than 5% of the total receipts that Maryland Sportservice earned during baseball season, i.e., well less than the 33 1/3% threshold.
As a result of the Court’s decision, baseball concessionaires at Oriole Park (and presumably at Great American Ball Park in Cincinnati and Progressive Field in Cleveland, where DNC Sportservice also operates) who work overtime are required to be paid . . . peanuts.