An employer can find itself on the hook for unpaid wages and benefits when it allows individuals to work in exchange for training and experience rather than compensation.
This issue arose when the plaintiffs voluntarily participated in an uncompensated training program intended to prepare them to work as dealers at casinos. The defendant provided the training in conjunction with a local community college. The plaintiffs sued, claiming that they should have been paid as employees during the 12-week training program.
The trial court sided with the defendant, and the plaintiffs appealed. The U.S. Court of Appeals for the 4th Circuit reversed and remanded, holding that the plaintiffs’ allegations raised the question of who was the primary beneficiary of the training. Employment status under the Fair Labor Standards Act depends in part on this “primary beneficiary” test.
Where the company providing the training derives the primary benefit and the individual trained is an employee rather than a trainee. The appeals court ruled that the allegation that the training program resulted in the casino-defendant having appropriately trained potential employees was enough to state a claim. Harbourt v. PPE Casino Resorts Maryland LLC, case number 15-1546 (April 25, 2016).
IMPACT: When establishing unpaid training or internship programs, employers must consider who derives the “primary benefit” from the relationship. Any program, regardless of title, that involves an individual performing work that benefits the company without compensation poses risk of liability.
Mark T. Kobata and Marty Denis are partners at the law firm Barlow, Kobata and Denis, which has offices in Beverly Hills, California, and Chicago. Comment below, or email firstname.lastname@example.org.