Though the Department of Labor currently is revisiting certain aspects of the FLSA, one aspect that remains unchanged is that “enterprise coverage” of a business under the Act attaches where the business has “employees engaged in commerce or in the production of goods for commerce” and has “annual gross volume of sales made or business done [of] not less than $500,000” (despite the fact that this revenue coverage threshold has not been updated for many years). Absent enterprise coverage, an employee must show individual coverage based on his or her own engagement in interstate commerce in order to avail himself/herself of FLSA rights. A Wisconsin federal court recently applied these principles in finding a Wisconsin small business and its employees were not covered by the FLSA. Shoemaker v. Lake Arbutus Pavilion, LLC, 2015 U.S. Dist. LEXIS 84507 (W.D. Wis. June 30, 2015).
In Shoemaker, plaintiffs had been partners with the owners of the corporate defendant but later became employees of the corporate entity operating a roller rink and diner. When plaintiffs sued for alleged unpaid overtime under the FLSA, defendant asserted competent evidence that it did not have $500,000 in annual gross sales, and asserted that Plaintiffs’ work for their substantially local business did not affect interstate commerce. The Court agreed, finding enterprise coverage absent based on Defendant’s revenue and that, even though Plaintiffs may have served some out-of-state customers or used “instrumentalities of interstate commerce like telephones and the Internet, on the whole they “worked for a local business in an intrastate capacity.” Thus, no individual FLSA coverage attached to their employment.
Small businesses, even those believing themselves under the FLSA’s revenue threshold, must analyze their compliance with the FLSA to avoid an expensive challenge to their practices under the Act. State law coverage thresholds also must be reviewed and analyzed.