As summer approaches seasonal businesses are starting to apply fresh coats of paint, focus on landscaping and planting and hire an influx of employees to meet the needs of customers over the coming months. Many businesses in areas frequented by tourists and vacationers do the lion’s share of their business in one particular season and are often so busy they sometimes neglect to pay attention to the issues that surround employing workers.
Businesses must be careful to meet all of the requirements of an employer even when operating only a few months per year. Workers who come to the area for even a short time are still employees for whom companies must maintain accurate time and payroll records and keep personnel files.
There are also some special considerations which sometimes come into play when operating a so-called seasonal business. Employers should therefore be familiar with regulations propounded by both the state and federal governments regarding these issues.
Typically, under both state and federal law employers are required to pay hourly or non-exempt employees at the rate of time and one half their regular rate of pay for each hour worked over forty in one week (“overtime pay”). There are exceptions to this requirement for certain businesses, but the rules under state and federal law are different, and this can be a confusing and perilous journey for a business.
The state minimum wage law provides that overtime pay must be paid unless certain specific exceptions are met. One such exception is for any employee employed by an amusement, seasonal, or recreational establishment if it either does not operate for more than 7 months in any calendar year, or its average receipts for any 6 months of the prior year were less than one-third of its average receipts for the other 6 months of the year. "Seasonal establishment" means an establishment whose business function can and does occur only during specifically identifiable times of the year as dictated by weather conditions, temperature, dependence on recreational and amusement activities, and major holidays and does not operate all year round.
What employers need to keep in mind, however, is that the state law applies generally only to very small businesses, i.e. those who gross less than $500,000.00 per year and do no business in interstate commerce. Examples of such businesses might include an ice cream stand which sells local products or a small landscaping or service business that operates only during a certain season.
Larger businesses are required to comply with the Fair Labor Standards Act (“FLSA”) which has different rules regarding which businesses are exempt from the requirement for overtime pay. To be exempt under the FLSA the business must be an “amusement or recreational establishment” in addition to operating for not more than seven months in a calendar year and meeting the one-third test referenced above. There is no specific “seasonal” exemption. The FLSA therefore allows the exemption for such establishments as amusement parks, golf courses and similar recreational establishments while requiring other types of so-called seasonal businesses to pay overtime. Restaurants, hotels, gas stations and other establishments which might operate only during certain seasons of the year due to the area in which they are located will often not be considered recreational or amusement businesses and will have to pay overtime pay unless they are so small that they do not meet the test for coverage under the FLSA.
The employer therefore needs to first analyze whether it is covered under state or federal law and then determine whether it meets the requirements for the exemption under that law. There are complicated tests for determining all aspects of coverage of the law, including calculating whether or not the $500,000.00 gross receipts threshold is met. Business would be wise to consult with counsel in the event there is any question about whether the company meets the relevant definitions.
The consequences of non-compliance with the overtime pay requirement can be severe. Employers may be required to pay back pay to current and former employees, sometimes going back as far as three years. In addition, both the state and federal Departments of Labor have the ability to assess civil penalties and charge interest. Worse yet, an inquiry into overtime issues could trigger an audit of the payroll and recordkeeping practices of the company, a process which can be intrusive and expensive. For that reason alone, it is critical that seasonal businesses get their hiring procedures and paperwork organized and ready for influx of new workers eager to welcome the summer season!
Charla Bizios Stevens is q Director and Shareholder in the Employment Law Practice Group at the law firm of McLane, Graf, Raulerson & Middleton, P.A. and is the Director-Elect of the SHRM NH State Council. Charla can be reached at 603-628-1363 or [email protected]. The McLane Law Firm is the largest law firm in the State of New Hampshire, with offices in Concord, Manchester, Portsmouth and Woburn,