Before we get into this post let me provide quick background, on September 23, 2014, Yvette Liebesman, a “volunteer” at St. Louis Rock ‘n’ Roll Half Marathon, filed a collective and class action in the Eastern District of Missouri against Competitor Group, the for profit corporation that owns and operates the Rock ‘n’ Roll marathon series (Liebesman v. Competitor Group Inc., E.D. Mo. 4:14-cv-01653-RLW). Liebesman’s complaint alleges that she “volunteered” as a bicycle escort and that Competitor Group “employs the Official Charities to create an impression in individuals who might provide it labor and the public that its events are not-for-profit and that it is a not-for-profit organization. Instead the Official Charities are both a revenue stream and a veneer for recruiting free labor for Defendant.” Ms. Liebesman claims that these practices violate both the Fair Labor Standards Act (“FLSA”) and various states’ minimum wage laws including Arizona, Colorado, Florida, Illinois, Missouri, Nevada, Oregon, Rhode Island, Washington and the District of Columbia. Competitor Group moved to dismiss the complaint and Liebesman filed an opposition.
On March 16, 2015, Competitor Group filed their Reply in Further Support of the Motion to Dismiss. With this filing, the briefing on Competitor Group’s Motion to Dismiss is complete and the Court will now decide whether the Fair Labor Standards Act (“FLSA”) applies to the Rock ‘n’ Roll Marathon and Half Marathon series (the Court may decide to order oral argument before making a decision but has not yet taken this step). This decision will likely have significant impact beyond the Rock ‘n’ Roll Marathon and Half Marathon series — if Liebesman survives the motion to dismiss, we will likely see a flurry of similar cases filed against for profit races.
Competitor Group’s reply tees up two major issues that the Court will need to address: (1) are the Rock ‘n’ Roll events recreational establishments; and (2) are the volunteers at Rock ‘n’ Roll events employees for the purposes of the FLSA? I’ve written about this before here and here but the reply brief adds a few new twists.
The Amusement and Recreational Establishment Exemption
The first argument Competitor Group makes is that the Rock ‘n’ Roll events fall into the “amusement or recreational establishment” exemption to the FLSA. What this exemption says is that if an event is: (1) and amusement or recreation; and (2) and establishment; and (3) operates for fewer than 7 months in a year then the FLSA does not apply.
Competitor Group argues that because each event is physically distinct — Seattle, St. Louis, Chicago, Brooklyn, San Diego, etc. — each race is a separate “establishment” for the purposes of the exemption and does not operate for seven or more months in a year (as a side note, Competitor Group also holds events in Dublin, Liverpool, Mexico City and Vancouver, I know nothing about wage and hour laws in these countries but I would be interested in knowing if their practices differed in races that take place outside the United States). There is no case law dealing with marathons, half marathon or other endurance events so Competitor Group draws analogies from other industries including photo shops, ski resorts, truck sales and Major League Baseball, not a perfect fit but there’s not a lot of case law available. Competitor Group also gets into some details on the interpretation of agency regulations, in this case the Department of Labor and the Equal Employment Opportunity Commission. Courts often ignore agency regulations, however, as is there is little applicable case law, these agency regulations interpreting the meaning of “establishment” may play a bigger than usual role.
Competitor Group also argues that running events are for “amusement or recreational purposes.” While this may sound like a strange argument to have to make, the exemption was created long before running races and endurance events became regular features of the landscape. I doubt that the drafters of the exemption could have anticipated that endurance events would generate hundreds of millions of dollars per year in revenue. Competitor Group relies on the dictionary definition of “recreation” and the fact that “sports events” are included in the definition of recreation as there is really nothing else upon which to rely.
Because of the lack of applicable case law, this is going to be an interesting analysis and decision for the Court. There is likely enough support to go either way with this decision and the reasoning behind the decision may prove to be more important that the decision itself.
Are Volunteers at For Profit Races Employees?
If Competitor Group does not win on its amusement and Recreational Establishment Exemption Argument, the court will address whether volunteers at Rock ‘n’ Roll events are “employees” for the purposes of the FLSA (if Competitor group wins on the establishment exemption argument, there’s no need for it to consider the whether volunteers can be considered employees so the Court may not address this issue). Competitor Group spends a lot of time arguing that it is not “per se” unlawful to volunteer at a for profit company. This is true but the examples of when it is legal to volunteer at a for profit company are few and far between. The argument may boil down to what is “compensation” and whether volunteers at Rock ‘n’ Roll events had (or have) any expectation of compensation. Competitor Group argues that their volunteers do not expect to be paid, but compensation extends much deeper than payment of wages and can include in kind benefits. This is likely the type of factual inquiry that will require discovery and additional evidence. If the court gets to this inquiry, I would not be surprised to see the Court deny the motion to dismiss so that the parties can engage in discovery.
Decisions on a Motion to Dismiss can take anywhere from a few weeks to a few months. Given average timing on these things, I would expect we’ll have a decision by summer.