NC Wage and Hour Act Amended To Exempt Seasonal Amusement Or Recreational Establishment Employees from Overtime Provision

By Michael B. Cohen

Under § 213(a)(3) of the Fair Labor Standards Act (FLSA), employees of seasonal “amusement or recreational establishment[s]” are exempt from the statute’s minimum wage and overtime protections. In order to qualify as an exempt establishment pursuant to § 213(a)(3), an amusement or recreational establishment must: (1) not operate for more than seven months in any calendar year; or (2) accrue, during any six months of the preceding calendar year, average receipts of not more than one-third of its average receipts for the remaining six months of such year.[1] Examples of such establishments, according to the legislative history discussing the 1966 FLSA amendment, include “amusement parks, carnivals, circuses, sport events . . . or other similar or related activities . . . .” H.R. Rep. No. 871, 89th Cong., 1st Sess. 35 (1965).

Within North Carolina, under the current form of the North Carolina Wage and Hour Act (NCWHA), § 213(a)(3) of the FLSA essentially means that employees of private[2] seasonal amusement or recreational establishments need to rely on state law to recover any overtime wages that they may be lawfully entitled to.[3] That avenue, however, will no longer be available to employees in North Carolina beginning next year. On July 25, 2017, Gov. Roy Cooper signed Senate Bill 82 into law (Session Law 2017-185), amending N.C. Gen. Stat. § 95-25.14(c) to include “[a]ny employee of a seasonal amusement or recreational establishment” as a class of employees exempt from the NCWHA’s overtime and record-keeping provisions. Session Law 2017-185, entitled “Achieving Business Efficiencies,” becomes effective on January 1, 2018.

The NCWHA, in § 95-25.2(13), defines “seasonal amusement or recreational establishment” using the same non-operational business test and gross receipts test utilized in the FLSA, 29 U.S.C. § 213(a)(3). Accordingly, under 13 N.C.A.C. 12 § .0103, although there is an apparent dearth of case law analyzing the term pursuant to the NCWHA, attorneys practicing in North Carolina may likely look to federal precedent for “persuasive [authority that] will carry great weight.” Such cases have enjoyed a steady pace recently, providing attorneys with an abundance of opinions to look to. See, e.g., Hill v. Del. N. Cos. Sportservice, 838 F.3d 281 (2d Cir. 2016) (affirming that an employer operating concessions services at Oriole Park at Camden Yards, the home field of the Baltimore Orioles, was exempt under 29 U.S.C. § 213(a)(3)); Jones v. Bryant Park Mkt. Events, LLC, 658 F. App’x 621 (2d Cir. 2016) (holding that a restaurant, which shared common ownership with and was marketed alongside an adjacent ice rink, was exempt under § 213(a)(3)); Vernon v. GO Ventures, LLC, No. 16-CV-13818 (E.D. Mich. May 12, 2017) (denying a campground employer’s motion to dismiss, wherein the employer argued exemption under § 213(a)(3)).

While the new law effectively eliminates the entitlement of North Carolina seasonal amusement or recreational establishment employees to premium overtime wages, it does also, to their benefit, enable such employees to be paid at the full minimum wage for all hours worked. Currently, pursuant to N.C. Gen. Stat. § 95-25.3(e), the Commissioner of the North Carolina Department of Labor may, “by regulation, establish a wage rate not less than eighty-five percent (85%) of the otherwise applicable wage rate in effect under subsection (a) which shall apply to any employee employed by an establishment which is a seasonal amusement or recreational establishment . . . .” The new law removes such language from § 95-25.3(e).

Beyond the aforementioned amendments to the NCWHA, other provisions originally set forth in Senate Bill 82, but neither ratified by the General Assembly nor signed into law, included an exclusion of direct sellers to consumers (such as sellers of Tupperware and Avon products) from coverage under North Carolina unemployment insurance, and a provision creating an exception to the rule that a franchisor is never the employer of a franchisee or the franchisee’s employee.

Michael B. Cohen is an attorney at The Law Offices of Gilda A. Hernandez, PLLC, where he focuses his practice on litigating complex class action wage and hour disputes pursuant to the Fair Labor Standards Act and the North Carolina Wage and Hour Act.

[1] Under the non-operational business test, a seasonal amusement or recreational establishment that continues to operate on a year-round basis, but in a different capacity as it does during its operational season, may still qualify for the exemption. For example, a summer camp that operates for three months each year, but that employs year-round workers to perform maintenance work, distinct from the operational purpose for which the business was formed, may be exempt under § 213(a)(3). Under the gross receipts test, average receipts for any (not necessarily consecutive) six months in which receipts were smallest cannot exceed one-third of average receipts for any six months in which receipts were largest. For example, to qualify under the gross receipts test, an amusement park open to the public for nine months each year, with total receipts of $1,800,000 during the six months in which its receipts were largest, cannot earn more than an average of $100,000 each month during the six months in which its receipts were smallest (one-third of its average $300,000 earned each month in which its receipts were largest).

[2] N.C. Gen. Stat. § 95-25.14(e) exempts from all provisions of the NCWHA “[e]mployment in a seasonal recreation program by the State of North Carolina, any city, town, county, or municipality, or any State or local agency or instrumentality of government . . . .”

[3] Indeed, under 13 N.C.A.C. 12 § .0501(b)(1)(A), seasonal amusement or recreational establishment employees are specifically delineated as employees exempt from the FLSA, but not from the NCWHA. However, although seasonal amusement or recreational establishment employees are currently entitled to the overtime protections of the NCWHA, N.C. Gen. Stat. § 95-25.4(a) provides that “employers of seasonal amusement or recreational establishment employees are required to pay those employees the overtime rate only for hours in excess of 45 per workweek,” instead of for hours in excess of 40 per workweek.