Harbourt v. PPE Casino Resorts Maryland: Fourth Circuit Recognizes Training Can Be Compensable Work Under FLSA

In Harbourt v. PPE Casino Resorts Maryland, LLC, 820 F.3d 655 (4th Cir. 2016) the Fourth Circuit held that under the Fair Labor Standards Act, compensable “work,” for which the FLSA requires employers to pay at least minimum wage, broadly encompasses physical or mental exertion, whether burdensome or not, controlled or required by the employer primarily for its benefit, and therefore training can constitute “work” under the FLSA.

Statutory Background – Compensable “Work” under the FLSA

Congress enacted the FLSA “to protect all covered workers from substandard wages and oppressive working hours.” Trejo v. Ryman Hosp. Props., Inc., 795 F.3d 442, 446 (4th Cir. 2015) (quotes omitted.) To accomplish these goals, the FLSA requires employers to pay their employees both a minimum wage and overtime pay. Hall v. DIRECTV, LLC, 846 F.3d 757, 761 (4th Cir. 2017).

Specifically, the FLSA requires employers to pay their employees at least the federal minimum wage. 29 U.S.C. § 206(a)(1). And it requires employers to pay not less than time and a half for each hour worked over forty hours during a workweek. Id§ 207(a)(1). The FLSA’s overtime requirement “was intended ‘to spread employment by placing financial pressure on the employer’ and ‘to compensate employees for the burden of a workweek in excess of the hours fixed in the Act.’ ” Calderon v. GEICO Gen. Ins. Co., 809 F.3d 111, 121 (4th Cir. 2015).

Relevant to the situation in Harbourt, the FLSA requires that employers pay employees the minimum hourly wage “for all hours worked.” Perez v. Mountaire Farms, Inc., 650 F.3d 350, 363 (4th Cir. 2011) (internal quotation marks omitted). As Harbourt pointed out, the FLSA Act does not define “work.” See 29 U.S.C. §§ 201–219. But the Supreme Court instructs that “in the absence of a contrary legislative expression” courts should assume that Congress was referring to work or employment “as those words are commonly used—as meaning physical or mental exertion (whether burdensome or not) controlled or required by the employer and pursued necessarily and primarily for the benefit of the employer and his business.” Tennessee Coal, Iron & R. Co. v. Muscoda Local No. 123, 321 U.S. 590, 598, 64 S.Ct. 698 (1944)superseded by statute on other grounds, Portal–to–Portal Act of 1947, Pub. L. No. 104–188, 110 Stat.1928. Harbourt, 820 F.3d at 658.

In Harbourt, the court addressed the question of whether a casino’s training program for prospective dealers constituted compensable “work” under the FLSA, even though the casino was not yet even open or operating at the time of the training. As explained below, the Harbourt held that such training could be compensable work for which the employer must pay minimum wages. 

Facts

The defendant, PPE Casino, operated a casino in Maryland. The Casino selected approximately 830 of the applicants to attend a “dealer school.” The “dealer school” consisted of four hours of daily instruction Monday through Friday, for about twenty hours per week, for twelve weeks. The school was scheduled to conclude about ten days before the start of legalized table gambling in Maryland. 820 F.3d 655, 657–58

Plaintiffs, who attended the dealer school, were not paid to attend it until the final two days. They alleged the training at the dealer school was specific to the manner in which the Casino’s employees were to perform the table games at the casino once it opened. The plaintiffs further alleged that although the Casino advertised the “school” as being held in conjunction with a community college, it was really just run by the Casino. The Casino authored all course materials, Casino employees provided all instruction, and attendees never interacted with anyone from a community college. During the “school,” the attendees completed employment forms, including an income tax withholding form and direct deposit authorization form. To help the attendees receive a gambling license by the end of the course, the Casino required them to submit to a drug test, provide their fingerprints and social security numbers, and authorize the Casino to obtain their driving records and perform criminal and financial background checks on them. 820 F.3d at 657–58

The Casino did not pay the attendees to attend the dealer school until the final two days of the twelve week course. For the final two days they were paid minimum wage. The plaintiffs filed a putative class action asserting violations of the minimum wage provisions of the FLSA and various state laws. The district court granted the Casino’s motion to dismiss, holding that the plaintiffs “fail[ed] to show that the primary beneficiary of their attendance at the training was the Casino rather than themselves.” 820 F.3d at 657–58.

The Court’s Decision

The Fourth Circuit reversed, holding the plaintiffs did sufficiently allege violations of the FLSA’s minimum wage provisions. 

In reaching this conclusion, the Fourth Circuit observed that “work” for FLSA purposes broadly encompasses “physical or mental exertion (whether burdensome or not) controlled or required by the employer” primarily for its benefit. 820 F.3d at 660 (quoting Tennessee Coal, 321 U.S. at 598. And the Supreme Court has held “training” can constitute “work” under the statute. Id. (citing Walling v. Portland Terminal Co., 330 U.S. 148, 151, 67 S.Ct. 639 (1947) (noting that “[w]ithout doubt the Act covers trainees”); McLaughlin v. Ensley, 877 F.2d 1207, 1208-10 (4th Cir. 1989) (holding trainee routemen of a food distribution company were “employees” for FLSA purposes when they participated in a five-day, 50–to–60–hour training program in which they learned how to load trucks and maintain food vending machines and helped experienced routemen perform their duties); and 29 C.F.R. §§ 785.27–.31 (2015) (establishing the requirements that mid-employment training must meet for the training not to count toward work hours). 

The Fourth Circuit rejected the Casino’s argument that because the trainees could not interact with paying customers in the Casino during the “school,” they failed to qualify as FLSA employees performing work for the Casino. “That the Casino could not operate table games during the dealer school does not necessarily mean that the Trainees were not working for FLSA purposes in attending the required ‘school.’” 820 F.3d at 660. Rather, the Fourth Circuit observed, “whether the required training would constitute work for FLSA purposes would depend on whether it primarily constituted a benefit to the employer or the trainee.” Id

The Fourth Circuit then found that plaintiffs sufficiently alleged facts to support a conclusion that the Casino, rather than the trainees, primarily benefited from the dealer school training. For example, the plaintiffs alleged that the Casino received a large benefit — a workforce of hundreds of dealers trained to operate table games to the Casino’s specifications when the table games became legal in Maryland. And the plaintiffs also alleged that they received very little from the twelve weeks of training that did not primarily benefit the Casino, since the training was unique to the Casino’s specifications and not transferable to work in other casinos.

The Fourth Circuit also pointed out that the plaintiff alleged the dealer school training was “either conceived or carried out in such a way as to violate … the spirit of the minimum wage law.” 820 F.3d at 660 (quoting Portland Terminal, 330 U.S. at 153. Specifically, the plaintiffs alleged that the “sole purpose” of the Casino’s “temporary makeshift ‘school’ was to hire the exact number of dealers needed to fill the vacant table games positions[,]” and that the Casino “disguised its employee-training course as a school for the purpose of not paying” the trainees. 820 F.3d at 660-61

The Fourth Circuit found that if these allegations were correct, “a fact finder could conclude that requiring applicants to attend a training ‘school’ for twenty hours each week for a full twelve weeks, training advertised to be associated with a community college course but that allegedly had nothing to do with any college, demonstrates that the Casino ‘conceived or carried out’ its ‘school’ to avoid paying the minimum wage. Id. The Fourth Circuit observed that “a fact finder could further conclude that an employer would only take such actions to avoid paying the minimum wage to persons who were labelled ‘trainees’ but who actually worked for the Casino and were FLSA employees.” Id

Accordingly, the Fourth Circuit held that the plaintiffs alleged sufficient facts to state a claim that the Casino violated the FLSA and the Maryland wage laws by failing to pay them for the dealer school training. 820 F.3d at 660-61.

Analysis

In sum, in Harbourt the Fourth Circuit held that training can be compensable “work” requiring at least minimum wages under the FLSA. For purposes of the FLSA, “work” broadly encompasses physical or mental exertion, whether burdensome or not, controlled or required by the employer primarily for its benefit. Therefore, an employee attending an employer’s training program can be performing “work” under the FLSA.

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Originally published on Tim Coffield’s website.

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