6th Circuit Applies “Primary Benefit” Test to Students in Work-Study Program
The United States Court of Appeals for the Sixth Circuit recently held that the proper test for determining whether persons participating in employer-sponsored training programs qualify as “employees” under the FLSA is an examination into which party derives the primary benefit from the relationship. The Sixth Circuit’s decision in Solis v. Laurelbrook provides guidance to any employer using students to perform work as part of a work-study or trainee program who are not monetarily compensated for such work.
Background
The Department of Labor Secretary filed suit in federal court seeking to enjoin future violations of the child labor provisions of the FLSA after its investigation into potential child labor violations committed by Laurelbrook Sanitarium and School, Inc. (“Laurelbrook”). Specifically, the Secretary requested a permanent injunction on the ground that Laurelbrook students are “employees” for purposes of the FLSA, thus subjecting Laurelbrook to the Act’s prohibitions on child labor.
Laurelbrook operates a boarding school for students in grades nine through twelve, an elementary school for children of staff members, and a 50-bed intermediate-care nursing home that assists in the students’ practical training (the “Sanitarium”). Pursuant to the philosophy and teachings of its founder, students in Laurelbrook’s boarding school learn in both academic and practical settings, the latter of which is spent in the Sanitarium’s kitchen and housekeeping departments, with older students providing medical assistance to patients. These students do not receive wages for the duties they perform.
Fair Labor Standards Act
The FLSA prohibits the use of “oppressive child labor” in commerce or in the production of goods for commerce. This restriction, however, is premised on an employment relationship – an individual who, “without promise or expectation of compensation, but solely for his personal purpose or pleasure, work[s] in activities carried on by other persons either for their pleasure or profit,” – is thus outside the Act’s protections.
Court’s Decision
The first issue addressed by the court was the proper test to be used in determining whether such an employment relationship is present in a training or learning situation. Notably, the court rejected Laurelbrook’s argument that its status as an accredited vocational school should conclusively resolve the issue in its favor. Furthermore, the court explicitly rejected the Secretary’s application of a six-factor test created by the Department of Labor’s Wage and Hour Division (“WHD”) for distinguishing between employees and trainees. Stating that such a test “is overly rigid,” “inconsistent with a totality-of-the-circumstances approach,” and “inconsistent with prior WHD interpretations and opinions endorsing a flexible approach,” the Sixth Circuit Court of Appeals instead adopted the “primary benefit” test. This test focuses on which party – the purported employer or the student – receives the primary benefit of the work performed. “By focusing on the benefits flowing to each party, the test readily captures the distinction the FLSA attempts to make between trainees and employees. . . . It also helps to readily identify relationships Congress sought to stamp out by enacting the FLSA’s child labor provisions: relationships that place adult employees in competition with minors.” The court suggested that “[f]actors such as whether the relationship displaces paid employees and whether there is educational value derived from the relationship are relevant considerations that can guide the inquiry.”
Applying this test to the facts of the case, the court concluded that student-workers were non-employees, properly excluded from the coverage of the FLSA. In reaching this determination, the court considered both the tangible and intangible benefits to the students. For instance, students were “provided with hands-on training comparable to training provided in public school vocational courses” and “the opportunity to obtain such an education in an environment consistent with their beliefs.” In contrast, evidence established that Laurelbrook “[was] sufficiently staffed such that if the students did not perform work at the Sanitarium, the staff members could continue to provide the same services there without interruption” (i.e., no displacement of current Laurelbrook employees occurred). Although recognizing that Laurelbrook did gain some benefits from the students’ activities, the totality of the circumstances weighed in favor of a finding that no employment relationship existed between Laurelbrook and the students. Thus, no violation of the FLSA could be established.
Conclusion
Employers should be aware of the Sixth Circuit’s decision in Laurelbrook. Indeed, numerous courts from around the country have either expressly or implicitly adopted the “primary benefit” test in determining whether an employment relationship exists in the context of a training or learning situation (including the Fourth, Fifth, and Eighth Circuits, and the Eastern District of Pennsylvania). To ensure that they do not to run afoul of the FLSA minimum wage requirements, employers should carefully consider whether a student or trainee qualifies as an employee under the primary benefit test. To guide this inquiry, employers should keep in mind that such a designation is dependent on the totality of the circumstances, and no one aspect of the relationship is determinative.
To discuss your company’s policy needs, contact any attorney in the Gibbons Employment & Labor Law Department. And watch for more posts on training and information about exciting new Gibbons educational programs on this blog.