As the employer community continues to defend the new series of claims challenging the longstanding practice of utilizing unpaid interns, FLSA Plaintiffs and their counsel continue to seek additional avenues to expand the scope of compensable work under the FLSA. In a new decision rejecting just such an attempt, the Court of Appeals for the Eighth Circuit upheld a tax preparation company’s practice of not compensating certain tax professional for pre-tax season continuing education training. Petroski v. H&R Block Enters., LLC, 2014 U.S. App. LEXIS 8291 (8th Cir. May 2, 2014).
In Petroski, Plaintiffs challenged a tax preparation company’s practice of requiring tax professionals employed only during tax season to complete continuing professional education (CPE) during the non-tax “offseason” in order to be eligible for rehire. Completion of the CPE training – which could be taken through the tax preparation business or any other qualified provider of continuing tax education – did not guarantee rehire. The company did not pay the tax professionals for the training time.
Plaintiffs argued, under authority developed under the National Labor Relations Act, that the recurring, periodic employment scenario created a continuous employment relationship throughout the lengthy tax offseason, and thus they were employees under the FLSA the entire time, as opposed to “trainees,” necessitating payment for the training time. Rejecting this assertion, the Eighth Circuit, citing the seminal Portland Terminal case, stated that “[I]n determining who are ‘employees’ under the [FLSA], common law employee categories or employer-employee classifications under other statutes are not of controlling significance.” Walling v. Portland Terminal Co., 330 U.S. 148, 150 (1947).
The Court then concluded that the railroad brakeman unpaid trainee scenario determined not to violate the FLSA in Portland Terminal almost 70 years ago was “not meaningfully different from” the question raised in Petroski, and determined that defendant derived no “immediate advantage” from the training because “tax professionals do not prepare tax returns or complete any other work for [the tax preparation company’s] clients during the rehire training . . . [or] displace any regular employees . . . nor does their completion of the training expedite [the tax preparation company’s] business.” Ultimately, in the Court’s view, the tax preparation company “does not reap the benefits until after the tax professionals accept the company’s [subsequent] offer of employment,” which they remained free to reject.
While this is a positive decision for the employer community, businesses that wish to implement and/or continue unpaid training programs must monitor developments in the law regarding “trainees” under the FLSA, closely review whether any mandatory non-compensable training is industry-specific as opposed to employer-specific and also consider state law nuances.