Ninth Circuit Holds FLSA Applies to On-Reservation Tribal Member-Owned Business

The United States Court of Appeals for the Ninth Circuit ruled on April 20 in Solis v. Matheson, Case No. 07-35633, that the overtime provisions of the Fair Labor Standards Act (FLSA) apply to a retail business owned by Indian tribal members and located on the Puyallup Indian reservation in Washington state.

The court further held that, because the FLSA applies to the retail business, the Secretary of Labor has the authority to enter the Indian reservation to audit the books of the business. The Ninth Circuit affirmed the decision of the district court on these two issues.

Three Exceptions to Applicability of General Statutes to Indian Tribes

Solis v. Matheson (also referred to as Chao v. Matheson) addressed whether certain FLSA provisions applied to a retail store known as Baby Zack's Smoke Shop. The Smoke Shop is located on trust land within the Puyallup Indian reservation and is owned by Paul and Nick Matheson, enrolled members of the Puyallup Indian Tribe. The FLSA provisions at issue were those requiring employers to pay overtime to employees and the Secretary of Labor's authority to enter the employer's place of business to inspect its books.

The court explained that "Indians and their tribes are equally subject to statutes of general applicability, just as any other United States citizen." Solis at *4519, citing Federal Power Comm'n v. Tuscarora Indian Nation, 362 U.S. 99 at 116 (1960). However, as the court discussed, where the statute is silent on its applicability to Indian tribes, the courts have acknowledged three exceptions to this general rule.

A federal statute of general applicability that does not explicitly apply to Indian tribes will not apply to tribes if (1) the law touches exclusive rights of self-governance in purely intramural matters, (2) applying the law to the tribe would abrogate rights guaranteed by Indian treaties, or (3) there is proof by legislative history or some other means that Congress intended the law not to apply to Indians on their reservations. Id., citing Donovan v. Coeur d'Alene Tribal Farm, 751 F.2d 1113, 1115-1116 (9^th Cir. 1985).

The tribal member business owners claimed they were exempt from the FLSA under the self-governance and treaty exceptions.

FLSA Exemption Claims Rejected

As to the self-governance exception, citing another Ninth Circuit decision, Snyder v. Navajo Nation, 382 F.3d 892, 895 (9^th Cir. 2004), the court provided that exemptions have been allowed "only in those rare circumstances where the immediate ramifications of the conduct are felt primarily within the reservation by members of the tribe and where self-government is clearly implicated." Id. at *4520.

As it explained, the court held in Snyder v. Navajo that the Navajo Nation was exempt from the FLSA and was not required to pay overtime to tribal law enforcement officers. The court held the Navajo Nation exempt from making overtime payments because law enforcement is an important function of self-governance and because the FLSA contains an exemption for state and local law enforcement officers. See also Reich v. Great Lakes Indian Fish & Wildlife Comm'n, 4 F.3d 490, 493 (7^th Cir. 1993) (holding that, although employees of tribal agencies are subject to the FLSA, tribal law enforcement employees are exempt from the FLSA's overtime requirements).

After rejecting the respondents' treaty exemption argument, the court held additionally that the Secretary of Labor possessed the authority to enter the Indian reservation to audit the Smoke Shop's books "as [the Secretary] would regularly do with respect to any private business." Solis at *4515.

Store Was Commercial Enterprise With Non-Indian Customers and Employees

In reaching its conclusions, the court remarked that the Smoke Shop was owned by tribal members rather than by the Tribe itself, and that the Tribe had not asserted its regulatory authority over employment and wages for non-Indians. While the mention of these facts suggests they influenced the court's decision in some respect, it is not known whether the court's holding would have been any different if the Smoke Shop had been tribally owned or if the Tribe had enacted a tribal law governing employment and wages for non-Indians.

Importantly, the court took note that the Smoke Shop "is a purely commercial enterprise engaged in interstate commerce selling out-of-state goods to non-Indians and employing non-Indians." Id. at *4526. The holding is consistent with a recent trend in similar cases to draw a distinction between tribal governmental activities and the "purely commercial" activities of an Indian tribe (even if those commercial activities exist to support governmental functions), especially where non-Indians may be significantly involved as customers or employees. See, e.g., San Manuel Indian Bingo & Casino v. NLRB, 475 F.3d 1306, 1313 (D.C. Cir. 2007) (applying the National Labor Relations Act to tribally-owned casino). Thus, all other facts being the same, it may not have mattered if the Smoke Shop had been owned by the Tribe.

Eleventh Circuit: Sovereign Immunity Mandates Dismissal of FLSA Complaint Against Tribes

Regarding a similar issue in other circuits, only the Eleventh Circuit, in an unpublished opinion, has indicated that it might not reach the same conclusion as the Ninth Circuit—at least where the employer is a tribe instead of tribal members. In Lobo v. Miccosukee Tribe of Indians of Florida, 279 Fed.Appx. 926 (11^th Cir. 2008), the court, without much discussion or analysis, distinguished between being subject to a statute and being subject to suit for violating a statute. Id. at 927. Without stating whether or not the Miccosukee Tribe is subject to the FLSA, the court held that the Tribe's sovereign immunity from suit mandated dismissal of an FLSA complaint because there is no indication that in enacting the FLSA Congress intended to abrogate tribal sovereign immunity. Id.