Kaplan v.Code Blue Billing & Coding, Inc.

This case was before the court on the consolidated appeal of three student externs who sued the administrators of their respective externships asserting that they had not been paid proper minimum wages. The courts below had all granted the respective defendants summary judgment, holding that the plaintiffs could not satisfy the “economic reality” test, and therefore they were not “employees” subject to the FLSA’s coverage. The Eleventh Circuit affirmed, applying the DOL’s six-factor test applicable to trainees. In so doing, the court rejected the plaintiffs’ contentions that the defendants benefitted from their work, while they essentially received no academic or monetary benefit.

The court reasoned:

Although Kaplan and O’Neill argue that their externship experiences were of little educational benefit, they did in fact engage in hands-on work for their formal degree program. Kaplan and O’Neill also received academic credit for their work and, by completing an externship, were eligible to earn their degrees.

Kaplan and O’Neill argue that, because they were performing tasks for Defendants’ businesses, Defendants benefitted economically from their work. The undisputed evidence, however, demonstrates that Defendants’ staff spent time—time away from their own regular duties—training Plaintiffs and supervising and reviewing Plaintiffs’ work. Even viewing the evidence in the light most favorable to Plaintiffs, Plaintiffs caused Defendants’ businesses to run less efficiently and caused at least some duplication of effort. Defendants received little if any economic benefit from Plaintiffs’ work. Thus, under the “economic realities” test, Plaintiffs were not “employees” within the meaning of the FLSA. See New Floridian Hotel, Inc., 676 F.2d at 470.

The Eleventh Circuit applied the DOL’s six factor test, derived from the Supreme Court’s decision in Portland Terminal—pertinent to determining whether a trainee qualifies as an employee under the FLSA, to reach its holding.

As explained in footnote 2, under the Administrator’s test, a trainee is not an “employee” if these six factors apply:

(1) the training, even though it includes actual operation of the facilities of the employer, is similar to that which would be given in a vocational school; (2) the training is for the benefit of the trainees; (3) the trainees do not displace regular employees, but work under close supervision; (4) the employer that provides the training derives no immediate advantage from the activities of the trainees and on occasion his operations may actually be impeded; (5) the trainees are not necessarily entitled to a job at the completion of the training period; and, (6) the employer and the trainees understand that the trainees are not entitled to wages for the time spent in training. Wage & Hour Manual (BNA) 91:416 (1975); see also Donovan v. Am. Airlines, Inc., 686 F.2d 267, 273 n. 7 (5th Cir.1982).

Reasoning that the externs at issue were not “employees” the court concluded:

The externship programs at Code Blue and EFEI satisfy all six of the Administrator’s criteria. The training provided was similar to that which would be given in school and was related to Plaintiffs’ course of study. The training benefitted Plaintiffs, who received academic credit for their work and who satisfied a precondition of graduation. Both Kaplan and O’Neill were supervised closely and did not displace Defendants’ regular employees. Defendants received no immediate advantage from Plaintiffs’ work and, at times, were impeded by their efforts to help train and supervise Plaintiffs. And both Kaplan and O’Neill admit that they were unentitled to a job after their externships and that they understood that the externship would be unpaid.

Click Kaplan v.Code Blue Billing & Coding, Inc. to read the entire decision.