Under the Fair Labor Standards Act (“FLSA”) “employees” are entitled to pay, but uncompensated “trainees” are not. The Eleventh Circuit Court of Appeals recently wrestled with the issue of whether a son, who was “learning the business” from his father, was an employee or trainee. Axel v. Fields Motorcars of Fla, Inc., No. 16-13829, 2017 WL 4461014 (11th Cir. Oct. 6, 2017).
Michael Axel worked as an automobile wholesaler for Fields Motorcars. He asked the General Manager of Fields to hire his son, Scott Axel, but the General Manager claimed that Fields was not hiring any new employees. Ultimately, the General Manager and Michael agreed on an arrangement under which Michael would hire Scott as his own employee and teach Scott how to become an automobile wholesaler. Each day, Scott would arrive at work with his father, review inventory, attend a daily used-car meeting and then go to lunch. After lunch, Scott posted cars on an internet website for Fields, discussed cars that could be listed for sale, and researched cars that were for sale at auction. Over the course of his work, Scott purchased sixty or seventy cars for Fields.
After Michael was terminated from employment by Fields, Scott sued and claimed that he was an employee of Fields who was denied pay in violation of the FLSA. Fields claimed that Scott was not entitled to pay because he was an uncompensated “trainee.” A trial court in Florida agreed with that argument and dismissed Scott’s claims. The Eleventh Circuit, however, found that more information was needed.
The court’s analysis borrowed from earlier decisions analyzing whether academic “interns” were entitled to compensation under the FLSA. The “intern” test analyzes seven factors, which focus heavily on the academic nature of internships. For non-academic “trainees,” the Court focused on:
- The extent to which the trainee and the employer clearly understand that there is no expectation of compensation. Any promise of compensation, express or implied, suggests that the trainee is an employee — and vice versa.
- The extent to which the training period is limited to the period in which the trainee receives beneficial learning.
- The extent to which the trainee’s work complements, rather than displaces, the work of paid employees.
- The extent to which the trainee and the employer understand that the training opportunity is conducted without entitlement to a paid job at the conclusion of training.
The results of those factors were inconclusive. The first and fourth favored Fields because Scott clearly understood that he was working without pay, and understood there was no promise of a job at the completion of training. But, the other factors somewhat favored Scott. The training period was of indefinite duration, and he did the work of other Fields employees when he did the online work for car sales.
The Court also noted that the analysis was not an “all or nothing” proposition. Scott could have been a trainee at times and an employee at others. As a result, the Eleventh Circuit vacated the dismissal of Scott’s claims and remanded the case back to the trial court.
The Axel case demonstrates how complex the issue of “interns” and “trainees” can be. If somebody is working for you without pay, you need to proceed cautiously and make sure that you are not violating the FLSA.