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Wage & Hour Law Update

Sixth Circuit Court of Appeals Affirms Trial Ruling That Vocational Students Are Not “Employees” Under FLSA

While it is understood that the FLSA applies to any “employee” employed by an “employer”, numerous courts have observed that this analysis does little to flesh who is an “employee”. In a recent appellate decision highlighting such difficulties, the Court of Appeals for the Sixth Circuit held students enrolled in a vocational training program at an accredited vocational high school were not employees entitled to minimum wage and overtime protections, affirming the district court. Solis v. Laurelbrook Sanitarium & Sch., Inc., 2011 U.S. App. LEXIS 8585 (6th Cir. Tenn. 2011).

Laurelbrook concerned a decades-old vocational program operated by a not-for-profit corporation associated with the Seventh-Day Adventist religion. Laurelbrook operated a boarding school as well as a 50-bed intermediate care nursing home, partially staffed by students as an integral component of their practical training and the school was accredited by the Tennessee Department of Education since sometime in the 1970s. Laurelbrook’s stated goals are to prepare students for a life of service after their education, such as missionary activities. As part of this training, students are assigned to the home’s kitchen and housekeeping departments, and at the age of 16, they also participate in a CNA (Certified Nurse’s Aide) program. Laurelbrook receives Medicaid funding from the federal government as payment for the care it provides to residents of the nursing home/sanitarium. 

The Secretary of Labor, acting on a tip from a private citizen, brought suit alleging the services provided by the enrolled students in the home were compensable work under the FLSA. 

The Secretary urged that the six-factor test developed by the DOL to address whether a “trainee” is an employee entitled to compensation should also apply to the students. The court rejected that approach, however, as “a poor method for determining employee status in a training or educational setting.” Opting for more flexible approach, the appellate court approved the District Court’s focus on “which party receives the primary benefit of the work performed by Laurelbrook students,” based on long-standing Supreme Court precedent. Id. at 21 citing Walling v. Portland Terminal Co., 330 U.S. 148, 149 (1947). After collecting various authority from around the country, the district court held that “the proper approach for determining whether an employment relationship exists in the context of a training or learning situation is to ascertain which party derives the primary benefit from the relationship.” The court then identified key factors, such as whether the relationship displaces paid employees and whether there is educational value derived from the relationship. 

The appellate court held the District Court did not err in ruling, after seven days of hearing testimony and receiving documentary evidence, that the students were the primary beneficiaries of the work performed. This was so because the students learned “practical skills about work, responsibility and the dignity of manual labor in a way consistent with the religious mission of their school.” Importantly, the District Court also found that while the school derived some benefit from the work performed by the students, the students did not displace compensated workers and that ultimately the home is “sufficiently staffed such that if the students did not perform work…the staff members could continue to provide the same services there without interruption.” 

In addition to the tangible benefits in the form of an accredited education, the Appellate Court also credited evidence in the record regarding the intangible benefits of participating in the school’s program, including an enhanced understanding of the importance of working hard and seeing a task through to completion, increased responsibility and leadership skills, sensitivity and respect for the elderly and infirm and a work ethic developed through the school. 

Laurelbrook represents a victory for the not-for-profit and academic community in upholding the treatment of properly enrolled students of accredited institutions as trainees not entitled to compensation under federal law. However, the FLSA reach remains broad, as the Laurelbrook court observed, and any decision to classify a student, trainee, intern or volunteer outside the protections of the statute must be made only after due consideration. Additionally, state law may provide broader protection.