Fourth Circuit Revives Live-in Innkeepers FLSA Claims

Randi Klein Hyatt
Randi Klein Hyatt

A recent case decided this week by the United States Court of Appeals for the Fourth Circuit, Balbed v Eden Park Guest House, et al., sheds some light on the somewhat confusing FLSA analysis that comes into play when an employer provides an employee on-site lodging and other benefits.

At its most basic level, the FLSA requires an employer to pay an employee a minimum wage rate based on the number of hours an employee works and the remuneration received for those hours worked. Things get a little complicated when an employee receives employer provided lodging.  Determining FLSA compliance requires two initial calculations: (a) the hours the employee actually works (i.e. is the employee “working” while watching television in his or her lodgings), and (b) the value of the on-site lodging.  In the Balbed case, the Fourth Circuit examined these issues in the context of an agreement that provided that Balbed “worked” at least 29 hours a week.

Eden Park argued that the agreement was a “reasonable agreement” under FLSA regulations, and as such the Court did not have to examine whether other on-site lodging requirements were met (i.e. lodging is provided in compliance with other law, the employer maintains accurate records of the costs of the lodging).  The Fourth Circuit disagreed, and ruled that Eden Park conflated the terms of the “reasonable agreement” with the value of the lodgings.  Put another way, the Court stated that while the agreement could denote how many hours the employee was “working” while also living on the premises, it did not bear on other FLSA requirements as to the value of the lodging provided to the employee.  Remember, the two basic components of the FLSA are how many hours worked, and what did the employee receive (whether straight wages or combined with benefits such as lodging, meals, etc.).  These are two separate analyses that Eden Park did not show at summary judgment.

The Court also addressed the failure of the employer to maintain records as to the value of the on-site lodging.  While that failure did not bar Eden Park from offering valuation evidence, the lack of records certainly will make it harder to prove.

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