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9th Cir.: FLSA Applicable To Retail Business Located On An Indian Reservation, Owned By Indian Tribal Members

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Andrew Frisch

Solis v. Matheson

Appellant Paul Matheson is a member of the Puyallup Tribe. The Puyallup Tribe is a Pacific Northwest Indian tribe that has a reservation in the State of Washington. Paul Matheson owns and operates a retail store known as Baby Zack’s Smoke Shop (“Baby Zack’s”), located on trust land within the Puyallup Indian Reservation. Appellant Baby Zack’s sells tobacco products and sundries to Indians and non-Indians. Some of the goods sold by Baby Zack’s have been shipped in from locations outside the State of Washington. Baby Zack’s accepts credit card and debit card payments and uses electronic or telephonic means of communication to banks and credit card companies located outside of the State of Washington. Baby Zack’s regularly employs both Indian and non-Indian workers.

In 2004 and 2005, Baby Zack’s had an annual gross volume of sales of not less than $500,000. Paul and Nick Matheson are employers within the meaning of the FLSA. If the FLSA applies, the amount of wages due to employees and former employees is $31,354.87.

Although they acknowledged that they were enterprises otherwise covered by the FLSA, Defendants argued that they were exempt from the FLSA, because they qualify for either or both the intramural affairs exception set forth in Donovan v. Coeur d’Alene Tribal Farm, 751 F.2d 1113, 1115-16 (9th Cir.1985), or the treaty rights exception.  The Court disagreed holding:

“In this opinion we resolve whether the overtime provisions of the Fair Labor Standards Act (“FLSA”) apply to a retail business located on an Indian reservation and owned by Indian tribal members.  We also resolve whether Appellee the Secretary of Labor for the United States Department of Labor (the “Secretary”) has the authority to enter the Indian reservation to inspect the books of that business… We conclude that the overtime requirements of the FLSA apply to the retail business at issue in this case.  Because the FLSA applies to the retail business, we conclude that the Secretary had the authority to enter the Indian reservation to audit the books of the business, as she would regularly do with respect to any private business.  We therefore affirm the decision of the district court on these two issues.”

In a separate issue, the Court found that the District Court’s appointment of a receiver due to Defendants’ failure to pay overtime wages was premature and reversed on that issue, stating, “[w]e conclude that the district court’s decision with respect to the automatic appointment of a receiver over the retail business in the event the overtime payments were not made was premature. We therefore vacate that portion of the judgment.”

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