## F I L E D United States Court of Appeals Tenth Circuit 

### JUL 15 1999 

### PATRICK FISHER Clerk PUBLISH
UNITED STATES COURT OF APPEALS

TENTH CIRCUIT

PAUL C. CHESSIN; CHRISTOPHER T. FORMAN; MICHAEL P. GALVIN; CARLA D. HANSON; DANIEL C. HASKIN; LEE R. STRAND; KARIN E. UEHLING, and other persons similarly situated,Plaintiffs-Appellants and CrossAppellees, vs. KEYSTONE RESORT MANAGEMENT, INC., a Colorado corporation,Defendant-Appellee and CrossAppellant. Nos. 98-1181, 98-1183

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF COLORADO

(D.C. No. 94-D-179)

David Lichtenstein, Denver, Colorado, for the Plain tiffs-Appellants/CrossAppellees. Susan Strebel Sperber (Michael D. Nosler and Samuel M. Ventola with her on the briefs) of Rothgerber, Johnson, & Lyons, Denver, Co lorado, for the DefendantAppellee/Cross-Appellant.

Before BALDOCK , KELLY , and MURPHY , Circuit Judges.- 2 -

KELLY , Circuit Judge.

This interlocutory appeal arises from an employmentsuit by ski patrollers against their employer Keystone Resorts Management, Inc. (“KRMI”). Plaintiffs seek to recover overtime pay at one-and-a-half time s the rate at which they were regularly employed, liquidated damages, reasonable attorney fees, and costs. The district court denied Plaintiffs’ motion for partia l summary judgment under the Fair Labor Standards Act (“FLSA”), 29 U.S.C. §§ 201 -219, holding that Keystone Ski Area (“Keystone”) and Arapahoe Basin S ki Area (“Arapahoe Basin”) each constitute an amusement or recreationa l establishment within the meaning of 29 U.S.C. § 213(b)(29), one of several e xemptions to the general overtime rule, 29 U.S.C. § 207(a). At all relevanttimes, KRMI owned and operated Keystone and Arapahoe Basin. Plaintiffs appeal the district court’s ruling that (1) Defendant KRMI operated a recreational establishment; (2) Arapahoe Basin is separate from Keystone for § 213(b)(29) purposes; and (3) applica bility of the exemption should be determined on a plaintiff-by-plaintiff an d workweek-by-workweek basis. KRMI cross-appeals the court’s determinatio n that it may not retrospectively benefit from the exemption. Our ju risdiction arises under 281 After this case arose, KRMI was acquired by Vail Associates and is now

known as Vail Summer Resorts, Inc. - 3 - U.S.C. §1292(a), and we affirm.

Background The seven named Plaintiffs and twenty-nine addition al Plaintiffs who filed written consents under 29 U.S.C. § 216(b) (requirin g written consent for employee to be named as party plaintiff in suit und er the FLSA) worked as ski patrollers at Keystone or Arapahoe Basin and were e mployed by KRMI. KRMI operated an all-season resort in Colorado that incl uded lodging, retail stores, restaurants, a convention center, and real estate s ales and development, in addition to skiing. 1 These facilities were located on or near National Forest System lands. Plaintiffs’ duties as ski patrollers encompassed snow and terrain management, search and rescue, public relations and customer service. In addition to performing tasks on the ski mountains, patrollers rode shuttle buses serving the ski and hospitality areas and provided information to resort guests on the buses. Plaintiffs sought partial summary judgment, contend ing that § 213(b)(29) did not apply to KRMI, or any portion of KRMI, because it was not a recreational establishment. KRMI then filed its own motion for summary judgment, claiming- 4 -

that Plaintiffs were not entitled to overtime compe nsation because they came under the § 213(b)(29) exemption. In denying the P laintiffs’ motion, the district court held that Keystone and Arapahoe Basin constit ute separate amusement or recreational establishments within the meaning of § 213(b)(29). Section 213(b)(29) states that The provisions of . . . section 207 . . . shall notapply with respect to – any employee of an amusement or recreational establishment located in a national park or on land in the Nation al Wildlife Refuge System if such employee (A) is an employee of a pri vate entity engaged in providing services or facilities in a national park or national forest, or on land in the National Wildlif e Refuge System, under a contract with the Secretary of the Interioror the Secretary of Agriculture, and (B) receives compensation for employment in excess of fifty-six hours in any workweek at a rate not less than one and one-half times the regular rate at which he is employed [.] Id. (emphasis added). The court found a genuine issue of material fact as to whether Plaintiffs worked any weeks longer than fifty-six hours but he ld that, “[i]f . . . Plaintiffs present evidence at trial that they worked in exces s of 56 hours and were not compensated, Defendant is not entitled to the exemp tion claimed in § 213(b)(29).” Aplt. App. at 521. KRMI subsequently asked the district court to recon sider its holding that the § 213(b)(29) exemption would not apply if Plain tiffs could prove that they worked in excess of fifty-six hours without overtim e compensation. KRMI also asked the court to clarify how the exemption would be applied. The court denied- 5 -

reconsideration, explaining that each Plaintiff wou ld be compensated at a timeand-a-half rate for work in excess of forty hours i n any week for which he worked more than fifty-six hours without overtime p ay. It also concluded that “each work week must be analyzed separately” to det ermine the applicability of § 213(b)(29), and “each Plaintiff will bear the burde n of proving at trial that he/she worked in excess of 56 hours in a work week and did not receive overtime pay for those hours.” Aplt. App. at 584. The parties t hen requested, and were granted, leave to bring an interlocutory appeal fro m the district court’s ruling on the FLSA claim. The parties do not dispute that (1) prior to Octobe r 1993, KRMI paid Plaintiffs a salary and did not provide overtime co mpensation, and (2) Plaintiffs worked overtime hours. However, the number of week s in excess of fifty-six hours (if any) that each Plaintiff worked remains i n dispute.

Discussion The denial of summary judgment is reviewed de novo on an interlocutory appeal. See, e.g. , Evanston Ins. Co. v. Stonewall Surplus Ins. Co. , 111 F.3d 852, 857-58 (11th Cir. 1997). We apply the same standar d as the district court, and summary judgment is appropriate only if “the pleadi ngs, depositions, answers to interrogatories, and admissions on file, together w ith the affidavits, if any, show- 6 -

that there is no genuine issue as to any material f act and that the moving party is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(c); see Butler v Prairie Village, Kansas , 172 F.3d 736, 745 (10th Cir. 1999). In reviewing a denial of summary judgment, “we examine the factual record and reasonable inferences therefrom in the light most favorable to the party opposing summary judgment.” Butler , 172 F.3d at 745 (quoting Kaul v. Stephan , 83 F.3d 1208, 1212 (10th Cir. 1996)). In a case involving the FLSA, an employer bears the burden of proving both the nature of the “establishment” it operates and the applicability of an FLSA exemption; we must construe the exemption narr owly against the employer. See Arnold v. Ben Kanowsky, Inc. , 361 U.S. 388, 392, 394 n.11 (1960).

I. Separate Establishments Plaintiffs argue that the district court failed t o identify the correct establishment in assessing the applicability of the § 213(b)(29) exemption. The court concluded that Keystone’s ski area and non-sk iing operations constitute a single establishment but that Arapahoe Basin is sep arate from Keystone. Plaintiffs challenge the ruling that Keystone and A rapahoe Basin are separate establishments. In their view, KRMI’s “operations, marketing, and strategic- 7 -

plan,” combined with “[t]he close proximity of Arap ahoe Basin to Keystone’s lodging facilities, and brevity of the shuttle bus ride between them” show that Arapahoe Basin and Keystone comprised a single esta blishment during the relevant time period. Aplt. Br. at 30. In focusing on administrative and economic integrat ion, Plaintiffs misconstrue the meaning of “establishment” under th e FLSA. Both the Supreme Court and the Tenth Circuit have held that “Congres s used the word ‘establishment’ to mean a distinct physical place o f business rather than an integrated business enterprise.” Brennan v. Yellow stone Park Lines, Inc. , 478 F.2d 285, 289 (10th Cir. 1973) (citing Phillips, In c., v. Walling , 324 U.S. 490 (1945)). In Yellowstone Park Lines , we reasoned that, because of the physical distance between restaurants, hotels, and other typ es of lodging and services within Yellowstone Park, such businesses could not be “considered as one integrated unit subject to exemption under [29 U.S. C. § 213(a)(3)],” the provision governing seasonal recreational establish ments. See id. at 290. The various establishments were “separate,” even though central management made policy for all of them and at least two classes of employees served more than one establishment. See id. at 288-89; see also 29 C.F.R. 779.23 (1998) (the word “establishment,” as it appears in § 213(b), means “ a ‘distinct physical place of business’ rather than . . . ‘an entire business or enterprise’ which may include- 8 -

several separate places of business”). The case law in at least one other circuit also sup ports the district court’s ruling on the “separate establishment” issue. In M itchell v. Birkett , 286 F.2d 474, 477-78 (8th Cir. 1961), two photography shops located nine miles apart were deemed separate establishments under the FLSA. The Eighth Circuit stated: Common ownership and close functional and economic relationship between physically separated units of a business ar e not sufficient to make such combined units a single establishment, particularly where, as here, the geographic separation is substantial. Id. at 478. Although the Yellowstone establishments were more t han fifty miles apart, a much greater distance than that between Ke ystone and Arapahoe Basin,

see Yellowstone Park Lines , 478 F.2d at 287, Birkettdemonstrates that some courts consider only a few miles a “substantial” ge ographic separation for the purposes of the FLSA. See Birkett , 286 F.2d at 477-78. In the instant case, Plaintiffs allege that the two ski areas marketed their operations as one enterprise, exchanged some employ ees, and lacked separate accounting and management. However, issues of busi ness integration are not dispositive in determining whether establishments are separate. Given the sixmile separation between Arapahoe Basin and Keystone , we hold that they constitute separate establishments for the purposes of § 213(b)(29).

II. Amusement or Recreational Establishment- 9 -

According to Plaintiffs, KRMI did not constitute a recreational establishment for the purposes of § 213(b)(29) beca use providing ski facilities could not be considered KRMI’s principal activity o r purpose. See Hamilton v. Tulsa County Public Facilities Authority , 85 F.3d 494, 498 (10th Cir. 1996) (stating that inquiry into recreational character l ooks to “primary purpose” of the establishment). Since we consider Arapahoe Basin aseparate establishment under § 213(b)(29), the only question is whether Ke ystone’s facilities are primarily recreational. Arapahoe Basin offers few, if any, attractions for the business traveler or retail customer; such faciliti es are all located at Keystone. In support of their position, Plaintiffs contend t hat Keystone derives substantial revenue from allegedly non-recreational sources, such as hotels, restaurants, retail stores, and a convention center , and that many of its clients visit on business trips. Because lodging and food sales represent Keystone’s second largest revenue source, aside from ski operations, see Aplt. App. at 741- 56, the contentions that lodging is not “recreation ” and that Congress did not intend the FLSA’s recreational establishment exempt ion to extend to full-service resorts represent the crux of Plaintiffs’ challenge

. We need not decide whether lodging, isolated from K eystone’s overall business, constitutes recreation within the meaning of § 213(b)(29). Rather, our inquiry centers on whether lodging and other servic es like restaurants and retail2 The only issue in Yellowstone Park Lines was whether the facilities

constituted one establishment. The parties stipulated that, if the court deemed establishments “separate,” the seasonal recreationa l exemption, 29 U.S.C. § 213(a)(3), would apply. See Yellowstone Park Lines , 478 F.2d at 287. - 10 - shops, viewed in the context of Keystone’s operatio ns on or near national forest land, have a recreational nature. This an issue of first impression in the Tenth Circuit. According to Plaintiffs, Hamilton establishes that “[i]t is the character of the revenue producing activity which affords the employer the protection of the exemption.” See 85 F.3d at 497. However, the Hamilton court was concerned with a different issue – whether the prop er focus of its exemption inquiry was the character of the establishment’s re venue-producing activity, rather than the type of work performed by the emplo yee, as the plaintiff urged.
See id. at 497-98. Another Tenth Circuit case appears to lend support to KRMI’s position. In Yellowstone Park Lines , we noted (but did not hold) that the facilities o perated by Yellowstone Park Company and its subsidiary – i ncluding many hotels and cabins – were “[u]ndoubtedly . . . recreational in character.” Yellowstone Park Lines , 478 F.2d at 288. 2 The sparse legislative history confirms that § 213( b)(29) requires “concessioners providing accommodations, f ood and other consumer goods in ‘national parks’” to “pay employees . . . time-and-one-half their regular rate of pay for all hours over 56 in a week.” H.R. Rep. No. 95-521, at 34 (1977),- 11 -

reprinted in 1977 U.S.C.C.A.N. 3201, 3235. Plaintiffs cite Brennan v. Texas City Dike & Marina , Inc. , 492 F.2d 1115 (5th Cir. 1974) for the proposition that a ruling i n KRMI’s favor will allow any merchant or lodging provider in the Rocky Mountains to circumvent the general overtime provisions of the FLSA – thus creating a v ast overtime exemption that Congress did not intend. Plaintiffs exaggerate the potential impact of affir ming the district court’s orders. Moreover, Texas City Dike is distinguishable from Plaintiffs’ case. In Texas City Dike , a marina, located on the Gulf of Mexico and deriving its principal revenue from the sale of boats, motors, and trailers, was found ineligible for the § 213(a)(3) exemption. Se e id. at 1119-20. The Fifth Circuit reasoned that, unlike a national park, the Gulf was not set aside for recreational use. Indeed, the court acknowledged, “enterprises that solely or primarily sell goods” may qualify for the § 213(a)( 3) exemption if they contract to operate in a “geographically delimited” area des ignated for recreational use. Id . at 1118-19; see id. at 1119 n.15. “Examples are pro shops at golf cou rses and dry goods stores in national parks.” Id at 1118-19 (footnotes omitted). By similar logic, § 213(b)(29) applies to Keystone. The parties do not dispute that both the Keystone and Arapahoe Basin ski areas occupy national forest land and that KRMI obtained a special use pe rmit from the Department of Agriculture, authorizing it to maintain a “four sea son recreation resort” in the3 KRMI urges us to give great deference to Colorado Department of Labor

Minimum Wage Order 22 and a brief letter from a Dep artment of Labor investigator concluding that Keystone is a recreati onal establishment. Given our disposition of the “separate establishment” and “re creational establishment” issues, we need not decide what deference we owe th ese documents. We note, - 12 - White River National Forest. Aplt. App. at 158 (emphasis omitted); see Aplt. Br. at 7. Thus, the fact that Keystone offers lodging, retail shops, restaurants and other activities besides skiing does not disqualify it from the § 213(b)(29) exemption. The evidence also establishes that, on an annual basis, ski operations represent the largest revenue-producing category fo r Keystone. See Aplt. App. at 745-56. Thus, we hold that Keystone and Arapahoe B asin were, at all relevant times, recreational establishments within the meani ng of § 213(b)(29)

. We decline to require an enterprise to derive a cer tain percentage of revenue from strictly recreational activities in or der to be considered recreational. Although the Texas City Dike court used an income test to determine whether providing recreation constitutes an enterprise’s pr incipal activity, see Texas City Dike , 492 F.2d at 1119-20, the Tenth Circuit has never held that financial percentages are the only relevant factors. We pref er to examine the totality of the circumstances, including but not limited to the est ablishment’s primary purpose; activities and services, such as restaurants and sh ops, that it offers incidental to its recreational facilities; its relationship to land set aside for recreational use; and its revenue sources. 3however, that the latter document is neither admiss ible as a proper affidavit under

Fed. R. Civ. P. 56(e), nor does it demonstrate the thorough consideration and reasoning necessary to provide guidance to this cou rt. See Skidmore v. Swift & Co. , 323 U.S. 134, 140 (1944). - 13 - III. Calculation of Overtime Compensation Owed to Plaintiffs A. Whether KRMI Has Lost the Benefit of the Exempt ion The district court held that KRMI does not qualify for the § 213(b)(29) exemption for any workweek in which a Plaintiff can prove that he worked more than fifty-six hours without time-and-a-half compen sation. KRMI is not eligible for the exemption under these circumstances, the co urt reasoned, because § 213(b)(29) embodies two conditions, both of which m ust be met. First, the employee must work for a recreational establishmentin a national park or national forest or on National Wildlife Refuge Syst em land. See § 213(b)(29)(A). Second, the employee must “receiv[e ] compensation for employment in excess of fifty-six hours in any work week at a rate not less than one and one-half times the regular rate.” See § 213(b)(29)(B). According to the district court, KRMI must compensate each Plaintiff at a time-and-a-half rate for work in excess offortyhours during any given week that KRMI failed to co mply with § 213(b)(29)(B). KRMI disputes this interpretation, contending that violation of § 213(b)(29)(B) means only that the employer must ret roactively comply – i.e. , that- 14 -

it must pay the employee overtime for work in exces s of fifty-sixhours. In support of its position, KRMI cites several cases r egarding failure to comply with the conditions of other FLSA exemptions. See Martin v. Coventry Fire Dist. , 981 F.2d 1358 (1st Cir. 1992) (construing § 207(k) over time exemption for firefighters and law enforcement officers); Mills v . State of Maine , 853 F. Supp. 551 (D. Maine 1994) (construing § 207(k) exemption for state probation officers); Lantz v. B-1202 Corp. , 429 F. Supp 421 (E.D. Mich. 1977) (interpreting § 213(b)(8)(A) overtime exemption forrestaurant employees). Two principles are common to these opinions. First, th ey suggest that receipt by an employee of overtime compensation according to the provisions of a FLSA exemption is nota condition precedent to the exemption’s applicabi lity. See
Lantz , 429 F. Supp. at 424. Second, two of the cases ci te the penalty provision of the FLSA, 29 U.S.C. § 216, for the rule that “an employer who fails to pay statutorily required overtime . . . must simply pay the overtime owed (if the violation is merely technical and in good faith).” Coventry Fire Dist. , 981 F.2d at 1360; see Mills , 853 F. Supp. at 552. None of these cases constru es §213(b)(29), however, and unlike KRMI, the defendan t in Lantz was faced with a relatively new statutory amendment, which arguably excused its failure to comply. See Lantz , 429 F. Supp. at 423. We next consider our precedent. In Spradling v. Ci ty of Tulsa , 95 F.3d- 15 -

1492, 1504-05 (10th Cir. 1996), we stated that an e mployer must affirmatively prove that it qualified for a FLSA exemption either because (1) it publicly declared its intent to establish a regime satisfyin g the exemption, or (2) the employee’s working conditions actually met the requ irements of the exemption. Although the employer failed to carry its burden in Spradling , proof that it actually paid overtime compensation in accord with § 207(k) does not seem to have been required. However, because Spradling involved a § 207(k) exemption, it does not provide a good model for determining wh ether KRMI adopted § 213(b)(29). Interpreting § 207(k), which authorizes the establi shment of non-traditional work periods for firemen, the Spradling court held that “a public employer may establish a 7(k) work period even without making a public declaration, as long as its employees actually work aregularly recurringcycle of between 7 and 28 days.” Spradling , 95 F.3d at 1505 (quoting McGrath v. City of Phila delphia , 864 F. Supp. 466, 476 (E.D. Pa. 1994)) (emphasis added) . To trigger the exemption, the evidence had to show that the firemen regularly adhered to the § 207(k) work period

. Thus, the mere fact that a ski patroller worked a t least one fifty-six-hour week per season does not prove that KRMI adopted § 213(b)(29). We are thus faced with an issue of first impression in the Tenth Circuit – whether to construe § 213(b)(29) to exempt KRMI fro m normal overtime rules- 16 -

based on a policy that it retrospectivelyadopted in response to this lawsuit. Although the First Circuit took this road, see Coventry Fire Dist. , 981 F.2d at 1360, we decline to follow its lead. Section 213(b )(29) – which consists of two conditions joined by the word “and” – is meaningles s if an employer does not have to satisfy both conditions. See Usery v. Associated Drugs, Inc. , 538 F.2d 1191, 1193-94 (5th Cir. 1976) (holding that, to ava il itself of the “professional employees” exemption under § 213(a)(1), employer ha d to prove “each of the conditions or standards prescirbed by the Regulatio ns”). If KRMI cannot demonstrate compliance with § 213(b)(29)(B), it mus t pay overtime compensation as required by §207(a).

B. Week-by-Week, Plaintiff-by-Plaintiff Determinat ion The district court ruled that “each work week must be analyzed separately” and “the exemption must be applied individually on a Plaintiff by Plaintiff basis.” Aplt. App. at 584. The language of § 213(b)(29) su pports a plaintiff-by-plaintiff approach because it refers to “any employee” (inste ad of the plural “employees”) and because it makes the exemption contingent on wh at kind of establishment the employee works for and whether he receives overtime pay, rather than on the employer’s overarching policy. Many of the regulat ions for implementing the FLSA also center on the employees covered by the Ac t, instead of employers- 17 -

subject to it. See, e.g. , 29 C.F.R. § 778.103 (1998) (referring to any work week in which “an employee is covered by the Act and is notexempt from its overtime pay requirements”). A workweek-by-workweek approach is also bolstered b y the plain language of the statute and regulations. Section 213(b)(29) refers to “any workweek,” rather than some alternate unit of time, see 29 U.S.C. § 213(b)(29)(B), and as KRMI notes, regulations governing the application o f § 207 make the workweek the proper unit for calculating overtime compensati on. See 29 C.F.R. § 778.103. The applicability of the § 213(b)(29) exemption mus t be determined on a plaintiff-by-plaintiff and workweek-by-workweek bas is. For the foregoing reasons, the district court’s int erlocutory orders are
AFFIRMED.