Fourth Circuit Reverses Motion to Dismiss Casino Trainees' FLSA Claim

Practical Law Legal Update w-002-1900 (Approx. 7 pages)

Fourth Circuit Reverses Motion to Dismiss Casino Trainees' FLSA Claim

by Practical Law Labor & Employment

Background

PPE Casino Resorts Maryland, LLC owns and operates Maryland Live!, a casino in Maryland. In a November 2012 referendum, Maryland authorized casinos, beginning on April 11, 2013, to operate table games.

The Casino needed to hire over 800 dealers by April 11 to begin operating its planned table games. The Casino developed what it labeled "a free 12 week table games dealer school" to be "held in conjunction with Anne Arundel County Community College."

In November 2012, the Casino selected approximately 830 applicants, including plaintiffs, Claudia Harbourt, Michael Lukoski, and Ursula Pocknett, to attend the dealer school which:

Was scheduled to run for 20 hours per week for 12 weeks from January 7, 2013 to April 1, 2013 (although numerous delays by Casino staff caused it to run longer).
Provided training specific to the way the Casino's employees were expected to perform the table games at Maryland Live!
Although advertised as being held in conjunction with a community college, in fact, was run completely by the Casino. For example:
- the Casino authored all course materials;
- Casino employees provided all instruction; and
- attendees never interacted with anyone from a community college.
Required the attendees to:
- complete employment forms, including an income tax withholding form and direct deposit authorization form;
- submit to a drug test and provide their fingerprints and social security numbers; and
- authorize the Casino to access their driving records and perform criminal and financial background checks.

Harbourt attended the dealer school for eight weeks, Pocknett attended for 11 weeks, and Lukoski attended school for all 12 scheduled weeks and worked as a dealer at the Casino. However, the Casino:

Did not pay Harbourt or Pocknett.
Paid Lukoski (and others who attended the dealer school for the full 12 weeks) minimum wage for the final two days of dealer school.

In 2014, the trainees filed this putative class action asserting violations of the FLSA and Maryland Wage and Hour Law and Wage Payment and Collection Law.

The Casino moved to dismiss for failure to state a claim on which relief can be granted. The district court granted the motion to dismiss, holding that the trainees failed to show that the primary beneficiary of their training was the Casino rather than themselves.

The trainees appealed to the Fourth Circuit.

Outcome

The Fourth Circuit vacated and remanded the district court, holding that the trainees have alleged sufficient facts to:

State a claim that the Casino violated the FLSA and Maryland wage laws.
Survive the Casino's motion to dismiss.

The Fourth Circuit expressed no opinion as to whether attending the dealer school constituted work or whether the trainees were employees under the FLSA.

The Fourth Circuit noted that:

The Supreme Court has made clear that a trainee may be an employee under the FLSA. For example, in Walling v. Portland Terminal Co., the Supreme Court affirmed judgment for the employer:
- concluding that railroad trainees could not claim the benefits of the FLSA when the training they received "most greatly benefitted the trainees" rather than the railroad. (330 U.S. 148, at 153);
- noting the district court's unchallenged findings that the railroad "received no immediate advantage" from the trainees' efforts during training;
- expressly finding that the record contained no "findings or charges" that the training was "conceived or carried out in such a way as to violate either the letter or spirit" of the FLSA; and
- leaving open the question of whether such "findings or charges" might require a different result.
(330 U.S. 148 (1947).)
Subsequent Supreme Court case law assessing whether a trainee constitutes an employee under the FLSA is sparse.
The Fourth Circuit has addressed the question only once in McLaughlin v. Ensley, in which:
- it held that 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 learning how to load trucks and maintain food vending machines, and helping experienced routemen perform their duties;
- relying on Portland Terminal, it identified the critical legal question as whether the trainee or the company was the "primary beneficiary" of the training program;
- it reasoned that whether the employer received an "immediate advantage" from the training was also "important to consider," but not dispositive;
- applying the controlling legal standard to the facts found by the district court, it held that the employer food distribution company "received more advantage" from the program than the trainees and so concluded that the trainees qualified as employees for purposes of the FLSA.
(877 F.2d 1207, 1208, 1210 (4th Cir.1989).)

The Fourth Circuit found that:

The Casino's argument that since the trainees could not interact with paying customers during dealer school they automatically fail to qualify as FLSA employees performing work for the Casino, fails because the trainees are in the same position as all other trainees who cannot yet legally perform their duties, for example inexperienced wait staff in a not-yet-operational restaurant.
Whether the required training would constitute work for FLSA purposes would depend on whether the training primarily benefitted the employer or the trainee. Resolution of that question cannot be determined by examination of the trainees' complaint.
In Ensley, it specifically recognized the importance of the transferability of the training (Ensley, 877 F.2d at 1210).
Unlike in Portland Terminal, in this case there are "charges" that the training was "either conceived or carried out in such a way as to violate ... the spirit of the minimum wage law." (Portland Terminal, 330 U.S. at 153). For example, the trainees allege 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
- the Casino disguised its employee training course as a school for the purpose of not paying the trainees.
A fact finder could conclude that:
- requiring applicants to attend a training school for 20 hours each week for a full 12 weeks, where the training was advertised to be associated with a community college course but had nothing to do with any college, demonstrates that the Casino conceived or carried out its school to avoid paying the minimum wage; and
- an employer would only take such actions to avoid paying the minimum wage to those trainees, individuals who actually worked for the Casino and were FLSA employees.
It is unclear what distinguishes the final two days of dealer school (for which the participants were paid minimum wage) from the rest of the training period. This suggests that the Casino regarded the dealer school participants as employees doing work for the Casino for those two days.

Practical Implications

Employers that wish to establish a training program to train employees for a specific position or function are well advised to pay those employees for their time. To avoid liability, employers that do not pay training program participants should ensure that the training is provided through an independent entity such as a community college, and should ensure the transferability (to other employers and positions) of the knowledge gained.

Fourth Circuit Reverses Motion to Dismiss Casino Trainees' FLSA Claim | Practical Law