Summer camps, typically a go-to option for many parents to send their kids when school lets out, are now faced with a myriad of other non-traditional competitors. Specialty camps, teen tours, and other options have affected the entire industry and forced some traditional camps out of business. To compensate for revenue losses, many camps have turned to alternative sources of income, such as bringing in outside groups and renting out their facilities during off-season months. Camp administrators must be mindful, however, that their expanded operating season can have severe implications under federal wage and hour law.
Section 13(a)(3) of the Fair Labor Standards Act (“FLSA”) exempts “organized camps,” such as summer camps, from most of the FLSA’s minimum wage and overtime requirements. However, to qualify for such exemptions, the camp must meet one of the following criteria: (1) the camp must not operate for more than seven months in any calendar year, or (2) in the previous calendar year, the average receipts for any six months must not have been greater than one-third of the camp’s average receipts for the other six months of the year. Determining whether the camp satisfies one of these criteria is not always clear.
In determining whether the camp has operated for more than seven months in the calendar year, not all activities count. Maintenance completed in the offseason, for example, is not considered operations. Construction to build new facilities would be analyzed similarly. However, renting the facility during the offseason may need to be counted in the equation, especially if the camp provides staff such as cooks, waiters, lifeguards, and maintenance workers.
Even if a camp does “operate” for more than seven months in a calendar year, it could still qualify for the FLSA exemptions if, in the previous calendar year, the average receipts for any six months were not greater than one-third of the average receipts for the other six months. This calculation can be based on any six months in the year, which need not be consecutive. For example, the six months with the highest average receipts might include the following: (1) January: $10,000; (2) May: $10,000; (3) June: $25,000; (4) July: $50,000; (5) August: $50,000; (6) September: $20,000. The total revenue is $165,000 which averages $27,500 per month. The six months with the lowest monthly receipts might include the following: (1) February: $5,000; (2) March: $5,000; (3) April: $5,000; (4) October: $5,000; (5) November: $5,000; (6) December: $5,000. The total revenue is $30,000, which averages $5,000 per month. Because the average revenue for the lowest six revenue months ($5,000) is not greater than one-third of the average revenue of the other six months of the year (one-third of $27,500 is $9,167), this hypothetical camp would be exempt. Obviously, camps with extended summer seasons and/or winterized facilities must be particularly mindful of this calculation.
Determining what constitutes a “receipt” and when it is received can also present challenges. Certainly revenue from tuition, camp fees, and the camp store, would clearly be included in the average monthly receipt calculation. Yet, for other types of revenue, such as vendor incentives and donations to the camp, the line is not as clear. Similarly, if money is paid in January for a camper to attend in July, to which month should this “receipt” be applied?
The answers to these questions are not always clear; the analyses are fact-sensitive and require close attention to the particular details of each camp. What is clear, however, is that camps forced to rely more heavily on outside income must be aware of these issues. The loss of the exemption in any given year requires full compliance with the FLSA’s minimum wage and overtime requirements and can lead to significant exposure for unpaid wages, including liquidated damages and fines in the event of a Department of Labor audit.
For more information, please contact John R. Vreeland, Esq., Director of the firm’s Wage & Hour Compliance Practice Group, firstname.lastname@example.org, or Brett M. Pugach, Esq., email@example.com.