When an employer allowed a worker to have his son shadow him on an unpaid basis in order to learn the work, how did they end up getting sued by the son for unpaid minimum wage and overtime?
Scott Axel was having trouble breaking into the auto sales profession, perhaps in part because of having been terminated by a rental car agency for missing work. The fact that he spent eight months in a residential drug treatment program may also have played a role.
Let’s Made a Deal
Scott’s father Michael, an automobile wholesaler for Fields Motorcars in Lakeland Florida, suggested to Fields that he would hire Scott as his own employee and teach him how to become an automobile wholesaler. Fields agreed but made it clear that they would not compensate Scott for any work he performed. Still, their General Manager did tell Scott “[a]s long as you try to learn everything you can that your dad knows, you know, we’ll try to ease you in here.”
Scott began shadowing his father on the job, including reviewing inventory, attending daily meetings, and spending several hours each day posting used cars for sale on an on-line auction site. Scott would enter a password provided to him by the sales manager and also review cars that needed to be posted on eBay or Craigslist.
Scott also performed a few tasks on the retail side, including posting cars for sale on eBay and Craigslist, and routine chores on the car lot.
Scott testified that he put in about 60 hours a week, almost all of which were at times when his father was present. Scott received no compensation from Michael or Fields, although Michael did allow Scott and his family to live in his house during this time.
That Wasn’t Part of the Bargain
Fields fired Michael approximately 15 months later, at which time Scott stopped coming to work. He subsequently sued Fields for violations of the Fair Labor Standards Act (FLSA) and its State law counterpart in Florida. Scott asserted that he was owed at least minimum wage for every hour he put in, plus overtime for the weeks in which he worked more than forty hours. The trial court dismissed the claim, leading to an appeal to the Eleventh Circuit Court of Appeals.
The question for the court was whether Scott was “employee” under the FLSA or merely an exempt trainee. This is typically determined by evaluating the following factors:
- Did the worker and the employer clearly understand that there is no expectation of compensation?
- How similar was the training to that which would be given in an educational environment, including the clinical and other hands-on training provided by educational institutions?
- How much is the internship or training program tied to the worker’s integrated coursework or the receipt of academic credit?
- How closely does the internship or training track the academic calendar?
- Is the internship duration limited to the period in which the employer provides beneficial learning?
- How much does the worker’s output complement the work of paid employees or, in the alternative, how much does it displace such work by paid staff?
- Did the intern and the employer understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship?
Ultimately, the question to be resolved is who is the primary beneficiary of the arrangement – is it the worker because of the valuable career-oriented training that was provided or the employer because of the amount of productive work they received?
How it All Shakes Out
The first factor (expectation of compensation) clearly broke in favor of Scott being a trainee. He obviously did not expect to be paid and Fields made it clear that they would not provide any compensation.
The Court considered factors two through four irrelevant because the unusual nature of this training arrangement did lend itself to the analysis that is ordinarily applied to academic programs.
The fifth factor – duration – was ambiguous, although 15 months seemed rather long and the 60-hour weeks seemed excessive for a training program. Thus, while the unique arrangement here made it difficult to say for sure, the Court seemed to conclude that this factor favored a finding that Scott was an employee.
The sixth factor – displacement of work- seemed to cut both ways. In many respects, Scott did not displace anyone because he often just did what his father was doing and went where his father went. However, there were times when he took direction from people other than his father and performed services that others could, or did, perform. Some of those tasks related to areas that were outside the scope of his father’s responsibilities.
The final factor – whether a job would be waiting for Scott – weighed heavily in favor of finding that he was not an employee since there was no proof in this regard other than the statement that Fields would “try to ease” Scott in.
On the whole, the factors went both ways and the Court believed that more facts were needed to make a proper conclusion. They therefore overturned the dismissal of the claim and determined that the matter should be subjected to a full (and probably expensive) trial on the merits. Indeed, they suggested that it might be possible to conclude that Scott was an employee at times and a trainee at times and that only a fuller development of the facts would allow for a proper decision.
So, Dad wants to show Son “the ropes” and Employer makes it very clear that Son won’t get paid and is not promised a job, yet the Court thinks that Son might be an employee? It is a pretty big stretch to conclude that Employer got more benefit from this training arrangement than Son did even though Employer received a little productive work during this time.
This case therefore is an excellent reminder never to assume that a training arrangement will necessarily be viewed in the way it was intended. If you enter into an agreement of any sort to provide training through a school program, an internship, or even an informal agreement, be sure to document the nature of the relationship. In that documentation, identify the training to be provided, that productive work is not intended, that there is no compensation (or perhaps only a stipend for expenses) and that there is no promise of future employment.
Then, be sure to monitor the arrangement to insure it is being followed and document through memos or checklists the training that is being provided. At the end of the day, you have to be able to prove that the training was legitimate and not merely a means of obtaining free labor.
An interesting side note – Michael sued the company, claiming that he was a victim of disability discrimination for being let go after returning to work after surgery for kidney cancer. After the jury ruled in his favor, a judge ordered that he receive almost $1.4 million in damages.