Whether time spent in training is compensable time under the Fair Labor Standards Act (“FLSA”) is an issue that the courts have addressed in a variety of contexts. A new Fourth Circuit decision – Harbourt v. PPE Casino Resorts Maryland, LLC – addressed that issue in the context of pre-hire training provided to some casino workers in Maryland and concluded that the casino workers alleged sufficient facts to proceed with their claims that they should have been paid for pre-hire training.

After Maryland legalized full-fledged casino gambling in November 2012, the state had a supply and demand problem. Casinos had six months to hire workforces before the law went into effect, but they found that there were not enough trained dealers to staff the table games. Maryland Live!’s solution was to create a “dealer school.”

Needing approximately 830 dealers to work its 150 table games, the casino vetted more than 10,000 applicants to participate in a free, twelve-week instructional program to equip them with the skills needed to work as dealers at Maryland Live! The trainees attended 20 hours of instruction per week, receiving training in techniques that the trainees contend were specific to Maryland Live!’s operations

The trainees were not paid for attending the program, and, after completing much of the school, some of the trainees filed a putative class and collective action lawsuit alleging that they should have been compensated as employees under the Fair Labor Standards Act (“FLSA”) and Maryland state law for time spent attending the dealer school.

Maryland Live! moved to dismiss the lawsuit, which was granted by the District of Maryland. The Fourth Circuit reversed, allowing the lawsuit to proceed. In reaching its decision, the Fourth Circuit applied the “primary beneficiary” test to determine whether the attendees were “trainees” who were not eligible for compensation, or “employees” who were eligible. In so doing, the Fourth Circuit reaffirmed prior precedent and joined the Second and Eleventh Circuits in rejecting the application of the U.S. Department of Labor’s six-factor test to determine whether an individual is a trainee or employee.

The court concluded that the plaintiffs had alleged sufficient facts to state a claim that the casino was the primary beneficiary of the school such that the attendees would be “employees” under the FLSA.

In reaching the decision to permit the lawsuit to proceed, the court rejected the casino’s argument that it could not be the primary beneficiary of the school because the trainees did not interact with customers and the casino did not receive any monetary benefit from their training. Rather, the plaintiffs sufficiently alleged that the casino received an immediate benefit — “an entire workforce of over 800 dealers trained to operate table games to the casino’s specification at the very moment the table games became legal.”

Because the Fourth Circuit addressed this issue in the context of a motion to dismiss, it only considered the sufficiency of the plaintiffs’ allegations. Maryland Live! will have an opportunity to rebut the plaintiffs’ allegations as the case proceeds.

While Maryland Live! may still establish that the trainees, and not the casino, were the primary beneficiaries of its dealer school such that their training time is not compensable, the decision to permit the lawsuit to proceed highlights the need for employers to review their own policies and practices relating to training. Employers that have training programs that do not pay attendees for their time should review those programs closely to determine whether they are for the primary benefit of the attendees and, if not, consider either paying the attendees for their attendance or restructuring them so that they primarily benefit the attendees, not the employer.

Among other things, employers who wish to implement or continue unpaid training programs should:

  • Ensure that attendees do not expect to be paid for the training;
  • Provide skills that are transferrable to other potential employers, rather than skills that are specific to the employer’s workplace;
  • To the extent possible, provide the training in an educational environment rather than the employer’s workplace.
  • In the context of internships, attempt to tie the training to a formal education program for the student or intern.
  • Not guarantee jobs to the attendees at the end of the training program; and
  • Not require the attendees to perform work that will displace current workers.