When I write and speak about wage and hour law and whether is applies to “volunteers” for for-profit races I am often met with a lot of statements such as “but, we take really good care of our volunteers” or “our volunteers really don’t want to be paid, they’re doing this because they love it.” While those statements may be true (in fact in most cases I believe them to be true) what the public or volunteers think and feel doesn’t matter in the wage and hour context, or as White House Counsel to Frank Underwood in House of Cards, “public opinion doesn’t have a law degree.”
With that in mind, let’s take a look at Yvette Liebesman’s Memorandum in Opposition to Competitor Group’s Motion to Dismiss in the case of Liebesman v. Competitor Group, Inc., 4:14-cv-01653-RLW (E.D. Mo.). To provide some quick background in 2014 Liebesman filed a collective action against Competitor Group alleging that Competitor Groups use of “volunteers” for the Rock ‘n’ Roll Marathon series violates 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 (you can check out my analysis of the Complaint here). Competitor Group moved to dismiss Liebesman’s Complaint arguing that the Rock ‘n’ Roll Marathon series fell into the “amusement or recreational establishment” exception to the FLSA and the “volunteers” in question were not employees under the law (check out my analysis of the motion to dismiss here). Now Liebesman has responded to the Motion to Dismiss and based on this response (and a reply Competitor Group will file next month), the judge will decide whether to dismiss the case or to allow it to proceed for additional factual investigation. This is a really important juncture for the case. If the judge denies Competitor Groups’ Motion to Dismiss, the decision will serve as a siren song for plaintiffs attorneys to search out other possible violators and file suit (I’m looking at you Ironman, Challenge, Spartan Race, Color Run, Tough Mudder and other big for-profit players in the endurance sports world — as a total aside it will be very interesting to see if Ironman’s potential wage and hour liability gets mentioned in any prospectus for the rumored initial public offering). If the court dismisses the Complaint, I foresee an appeal but a dismissal may delay additional cases for the time being (a wait and see approach).
To get to the nuts and bolts of the opposition itself — Liebesman raises three major arguments: (1) that the Rock ‘n’ Roll Marathon series functions as an integrated entity, not as series of distinct and separate events; (2) that the “volunteers” are employees under the FLSA even though many “would decline its protections;” and (3) that a factual record needs to be developed before any decision on these issues can be made (for the more legally inclined, that this is an issue for summary judgment, not for a motion to dismiss). These are arguments are important because they provide a road map to both race directors and potential plaintiffs (and their attorneys) as to what may trigger liability and what to do to (potentially) avoid liability.
Separate “Amusement or Recreational Establishment” Exception
As I’ve previously written there’s very little case law for the argument that a road race (or similar endurance event) is a separate “amusement or recreational establishment.” There is, however, a Department of Labor regulation (29 C.F.R. Section 779.305), which states that in order to be considered a separate establishment a business must have physical separation, operation as a separate unit with separate records and book keeping and no integration of employees. Liebesman argues that Rock ‘n’ Roll events are:
- operated, organized and marketed as a “series” or “tour;”
- orchestrated out of Competitor Group’s San Diego head quarters;
- all employees are centrally hired by the San Diego head quarters;
- wages are set by the San Diego head quarters;
- locations of employment are set by the San Diego head quarters; and
- uses many of the same employees and transports the same equipment to many or all of its races.
Based on these facts, she concludes that the Rock ‘n’ Roll marathon events cannot be separate “amusement or recreational establishments.” She further argues (going to point three) that this is a fact intensive inquiry and that a court can’t dismiss her Complaint without allowing for the additional development of facts concerning how Competitor Group and the Rock ‘n’ Roll series function. This last part is particularly important. There is an argument here that this type of decision can’t and shouldn’t be made without additional discovery. The court may hard time making this decision without additional factual inquiry.
“Volunteers” at For-Profit Events Are Actually Employees
I’ve discussed this before as well, under the current law, “volunteers” at for-profit events may be considered employees and, as Liebesman points out, these volunteers ares still considered employees under the FLSA “even if they would decline it protections.” In applying the test of whether “volunteers” at the Rock ‘n’ Roll series would be considered employees Liebesman has another laundry list of facts:
- Competitor Group sets the work rules, assignments and conditions for volunteers;
- Competitor Group provides training and instruction to volunteers;
- Competitor Group maintains records of volunteers;
- The labor of the volunteers is necessary and integral to Competitor Group’s business (putting on races);
- The labor directly benefits Competitor Group;
- Competitor Group has a “Coordinator, Volunteer Services” who orchestrates volunteers on behalf of Competitor Group; and
- Competitor Group pays some workers to perform the same functions if they cannot get enough volunteers.
So, what happens next? Competitor Group’s Reply to the Memo in Opposition is due in two weeks. At that point the judge can decide to rule on the papers or can order oral arguments. If I were the judge (that would be awesome), I would have a hard time with this. I think Liebesman may have raised enough issues to survive the Motion to Dismiss and that further factual investigation may be needed. What will be really interesting is what Competitor Group decides to do if Liebesman does survive the Motion to Dismiss. While public and volunteer opinion may be against collective actions against races, public opinion will not matter if this case proceeds to discovery.