9th Circuit applies federal overtime statute to Indian-owned business operating on trust land
April, 2009
The 9th Circuit Court of Appeals recently held in Solis v. Matheson, No. 07-35633 that the overtime provisions of the federal Fair Labor Standards Act (FLSA) apply to a business owned by a tribal member and operating on trust land within the boundaries of a reservation. Baby Zack's Smoke Shop is a retail store owned by a member of the Puyallup tribe and located on trust land within the Puyallup Indian Reservation. Baby Zack's regularly employs both Indian and non-Indian workers, and sells products to Indians and non-Indians. The Secretary of Labor for the U.S. Department of Labor first subpoenaed records from the company, and then filed suit after determining that the company and another tribal member (who apparently managed the shop) failed to pay some of employees overtime in accordance with the FLSA.
The tribal business owner argued that the FLSA did not apply to the business under either or both of the intramural affairs or treaty rights exceptions set forth in Donovan v. Coeur d'Alene Tribal Farm, 751 F.2d 1113 (9th Cir. 1985). The court disagreed. The FLSA, the court found, is a statute of general applicability silent on the issue of its application to Indian tribes. Because the Indian-owned company was not engaged in intramural activities (because it sold products to non-Indians) and was not essential to the tribe's self-governance, and because the Puyallup Tribe had not enacted its own wage and hour laws, the court held that the intramural affairs exemption did not apply. Thus, the statute applied to the business in the same way as other federal employment laws can apply to tribal employers. These include the Age Discrimination in Employment Act (ADEA), Americans with Disabilities Act (ADA), the Employment Retirement Income Security Act (ERISA), the National Labor Relations Act (NRLA), and the Occupational Safety and Health Act (OSHA), each of which courts have found can apply to tribal-owned businesses.
The court made two additional decisions that impact tribal sovereignty. First, it determined that because the FLSA applied to this business, the Secretary of Labor could enter onto the reservation to investigate FLSA claims and obtain wage and hour records. Second, the court concluded that if the business was ordered to pay overtime wages and associated penalties and failed to do so, the court could appoint a receiver to take over the finances of the business to ensure that payment was made.
This decision represents another move by U.S. courts to apply federal employment laws to tribal employers, notwithstanding tribal sovereignty. Tribal members who own or operate businesses should be aware that they may be subject to a growing body of federal employment laws under these decisions, and may want to seek advice on whether these laws apply to them and how to comply.