No. ________

IN THE SUPREME COURT OF THE UNITED STATES

________________________________________________

RISA KAPLAN and LINDA O’NEILL, Petitioners,

vs.

CODE BLUE BILLING & CODING, INC.,

LINDA M. YON; and EAST FLORIDA EYE INSTITUTE Respondents.

ON PETITION FOR WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS FOR THE ELEVENTH CIRCUIT

________________________________________________

PETITION FOR WRIT OF CERTIORARI ________________________________________________

MATTHEW SARELSON

Counsel of Record CHRISTIAN LEVESQUE

CONRAD & SCHERER, LLP 633 South Federal Highway

Fort Lauderdale, Florida 33301 (954) 847-3358

msarelson@conradscherer.com

Counsel for Petitioners

 

 

QUESTIONS PRESENTED

Under the Fair Labor Standards Act (FLSA), an “employee” must be compensated for work performed unless she falls within a narrow class of exceptions to coverage, including individuals found to be “trainees.” The circuits are split as to the proper test for determining when an intern or extern is a “trainee” excluded from the minimum wage and overtime pay protections of an “employee” under the FLSA. To make this determination, the Eleventh Circuit applies an “economic realities” test. The Fourth, Fifth, and Sixth Circuits apply a “primary benefit” or “primary beneficiary” test. The Tenth Circuit and lower courts in the Second Circuit apply a “totality of the circumstances” test.

Additionally, the circuit courts are split concerning the level of deference to afford the Department of Labor (DOL), Wage and Hour Division’s six-factor test for determining when an internship meets the “trainee” exception to FLSA coverage. The Fourth and Sixth Circuits have rejected the DOL test, and the Tenth, Eleventh, and lower courts in the Second Circuit have accepted it to varying degrees.

The questions presented are:

1. What is the proper test for determining when an intern or extern is a “trainee” not entitled

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to the minimum wage protections of an “employee” under Sections 203(e)(1),(g) of the FLSA?

2. Is the DOL’s six-factor test for excluding “interns” from FLSA protections entitled to deference, when the factors are inconsistent with this Court’s precedent in Walling v. Portland Terminal, 330 U.S. 148 (1947) and Tony & Susan Alamo Foundation v. Secretary of Labor, 471 U.S. 290 (1985)?

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PARTIES TO THE PROCEEDING

All parties or Petitioners are listed in the caption and are individuals.

RULE 29.6 STATEMENT

None of the Petitioners is a nongovernmental corporation. None of the Petitioners has a parent corporation or shares held by a publicly traded company.

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TABLE OF CONTENTS Page

QUESTION PRESENTED ........................................i PARTIES TO THE PROCEEDING AND RULE 29.6 STATEMENT ................................. iii LIST OF APPENDICES…………………………… ..vii TABLE OF AUTHORITIES ....................................ix OPINIONS BELOW ................................................. 1 JURISDICTION ....................................................... 1 STATUTORY PROVISION INVOLVED ................ 2 THE TEST FOR UNPAID INTERNS……………….3 STATEMENT OF THE CASE ................................. 5 REASONS FOR GRANTING THE WRIT OF CERTIORARI ............................................... 9 I. There is an Important Circuit Conflict

Regarding the Proper Test for Determining When an Intern or Extern is a “Trainee” Excluded from the Minimum Wage and Overtime Pay Protections of an “Employee” Under Section 203(e)(1) of the FLSA and Regarding What Level of Deference, if any, to Afford to the DOL’s

Six-Factor Test………................................. ……12

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A. There is an Important Circuit Split

Concerning the Proper Test to Apply to Determine Whether an Intern or Extern Is an “Employee” Under the

FLSA…………………………………………… 14 (1) The Eleventh Circuit’s Economic Realities Test…………........… 14

(2) The Fourth, Fifth, and Sixth

Circuits’ Primary Benefit Test………..... 17 (3) The Tenth Circuit’s and U.S. District Court for the Southern District of New York’s Totality of the Circumstances Test……............... 19

B. There is an Important Circuit Split

Concerning the Appropriate Level of Deference, if any, to Afford to the

DOL’s Six-Factor Test……………………….. 21

II. This Case Presents the Ideal Vehicle for Addressing When an Intern or Extern is a “Trainee” Exempt from FLSA Protection and the Level of Deference Afforded to the DOL Six-Factor Test…………….………..… 25

III.The Eleventh Circuit’s Decision Conflicts with this Court’s Precedent…………………….. 30

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A. The Panel’s Economic Realities Test Conflicts with This Court’s Precedent

in Portland Terminal………………………… 31

B. The Panel’s Consideration of the DOL Factors Conflicts with this Court’s Precedent in Portland Terminal and Tony & Susan Alamo Foundation…………. 33

C. The Panel’s Consideration of Whether

Petitioners Received Academic Credit Conflicts with this Court’s Precedent in U.S. Cartridge Co. and is Not

Dispositive..................................................... 36

CONCLUSION…………………………….…………. 38

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LIST OF APENDICES Page

APPENDIX A:

Opinion, Case No. 12-12011 United States Court of Appeals, Eleventh Circuit Filed January 22, 2013.................................A-1

APPENDIX B: Order granting Defendants’ Motion for Summary Judgment, Case No. 11-cv-81049 United States District Court, Southern District of Florida Filed March 12, 2012...................................B-1 APPENDIX C: Order granting Defendants’ Motion for Summary Judgment, Case No. 11-cv-14384 United States District Court, Southern District of Florida Filed April 17, 2012.....................................C-1

APPENDIX D: Order denying Appellants’ Petition for Rehearing and Petition for Rehearing En Banc, Case No. 12-12011 United States Court of Appeals,

Eleventh Circuit Filed April 10, 2013…………………..……...D-1

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APPENDIX E: Fair Labor Standards,

28 U.S.C.A. § 1350.......................................E-1 APPENDIX F: Fact Sheet #71: Internship Programs Under The Fair Labor Standards Act U.S. Department of Labor Wage and Hour Division............................. F-1

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TABLE OF AUTHORITIES

Page(s) CASES Archie v. Grand Cent. P’ship, Inc., 997 F. Supp. 504 (S.D.N.Y. 1998)………….. …..20 Atkins v. Gen. Motors Corp., 701 F.2d 1124 (5th Cir. 1983)…………………...22 Blair v. Wills, 420 F.3d 823 (8th Cir. 2005)……….……………17 Bobilin v. Bd. of Educ., 403 F. Supp. 1095 (D. Haw. 1975)…………..….37 Bonnette v. Cal. Health & Welfare Agency, 704 F.2d 1465 (9th Cir. 1983)…………….……..14 Brooklyn Sav. Bank v. O’Neil, 324 U.S. 697 (1945)………………………. ………35 Donovan v. Am. Airlines, Inc., 686 F.2d 267 (5th Cir. 1982)………….. ……12, 17 Donovan v. New Floridian Hotel, Inc., 676 F.2d 468 (11th Cir. 1982)…………….. …….14 Fed. Express Corp. v. Holowecki, 552 U.S. 389 (2008)……………. …………………21

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Glatt v. Fox Searchlight Pictures, Inc., 2013 WL 2495140 (S.D.N.Y. June 11, 2013)……………………… ………13, 19, 20, 25, 35 Goldberg v. Whitaker House Cooperative, Inc., 366 U.S. 28 (1961)……………………………. …..15 Harris v. Vector Mktg. Corp., 753 F. Supp. 2d 996 (C.D. Cal. 2010)…….…….22 Isaacson v. Penn Cmty. Servs., Inc., 450 F.2d 1306 (4th Cir. 1971)…………...18, 23-24 Kitchings v. Fla. United Methodist Children’s Home, Inc., 393 F. Supp. 2d 1282 (M.D. Fla. 2005)….……..11 Powell v. U.S. Cartridge Co., 339 U.S. 497 (1950)………………… .17, 31, 36, 37 Marshall v. Baptist Hosp., Inc., 473 F. Supp. 465 (M.D. Tenn. 1979)…..27,-29, 37 668 F.2d 234 (6th Cir. 1981)…..………….. …5, 28 McComb v. Homeworkers’ Handicraft Coop., 176 F.2d 633 (1049)…………………………..…...35 McLaughlin v. Ensley, 877 F.2d 1207 (4th Cir. 1989)………………passim Nationwide Mut. Ins. Co. v. Darden, 503 U.S. 318 (1992)………………………………..15

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Reich v. Parker Fire Prot. Dist., 992 F.2d 1023 (10th Cir. 1993)............................... …...13, 19, 20, 22, 24, 34 Reich v. Shiloh True Light Church of Christ, 895 F. Supp. 799 (W.D.N.C. 1995)……………...37 85 F.3d 616 (4th Cir. 1996)………...............…...37 Rotherford Food Corp. v. McComb, 331 U.S. 722 (1947)………………………..……...15 Scantland v. Jeffry Knight, Inc., 2013 WL 3585635 (11th Cir. 2013)……..….15, 31 Skidmore v. Swift & Co., 323 U.S. 134 (1944)………………. ………….13, 22 Solis v. Laurelbrook Sanitarium & School, Inc., 642 F.3d 518 (6th Cir. 2011)…….………….passim States v. Rosenwasser, 323 U.S. 360 (1945)………………………..………10 Todaro v. Twp. of Union, 27 F. Supp. 2d 517 (D.N.J. 1998)……… ……….18 Tony & Susan Alamo Foundation v. Secretary of Labor, 471 U.S. 290 (1985)……… ………10-11, 34-35, 36

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United States v. Silk, 331 U.S. 704 (1947)……………………….. ……..15 Usery v. Pilgrim Equipment Co., 527 F.2d 1308 (5th Cir. 1976)…………..……….15 Villarreal v. Woodham, 113 F.3d 202 (11th Cir. 1997)……… ….14, 26, 31 Walling v. Portland Terminal, 330 U.S. 148 (1947)…..……………………...passim Wang v. Hearst Corp., 2013 WL 1903787 (S.D.N.Y. 2013)…….13, 20, 24 2013 WL 3326650 (S.D.N.Y. 2013)….. …….13, 19 Wirtz v. Wardlaw, 339 F.2d 785 (4th Cir. 1964)………………. ……23 STATUTES 28 U.S.C. § 1254(1)……………………………..………2 29 U.S.C. § 203(e)(1)………………..……………….2, 6 29 U.S.C. § 203(g)……………..………………………...6

 

 

PETITION FOR A WRIT OF CERTIORARI

Petitioners Risa Kaplan and Linda O’Neill respectfully petition for a writ of certiorari to review the judgment of the United States Court of Appeals for the Eleventh Circuit.

OPINIONS BELOW

The January 22, 2013 unpublished opinion of the court of appeals is reported at 504 F. App’x 831 (11th Cir. 2013) and reprinted at Appendix A of this petition. The April 10, 2013 order of the court of appeals denying Petitioners’ timely petition for rehearing and rehearing en banc is not reported and is appended to this petition at Appendix D. The March 12, 2012 order of the United States District Court for the Southern District of Florida granting summary judgment against Petitioner Risa Kaplan is unreported, but appended to this petition at Appendix B. The April 17, 2012 order of the United States District Court for the Southern District of Florida granting summary judgment against Petitioner Linda O’Neill is also unreported, and appended to this petition at Appendix C.

JURISDICTION

The decision of the court of appeals was entered on January 22, 2012. A timely petition for rehearing and rehearing en banc was denied on April 10, 2013. On July 1, 2013 this Court granted an extension of time to file this Petition for Writ of Certiorari up to and including August 8, 2013. This

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Court has jurisdiction pursuant to 28 U.S.C. § 1254(1).

STATUTORY PROVISIONS INVOLVED

Section 203(e)(1) of the Fair Labor Standards Act (FLSA), 29 U.S.C. § 203(e)(1) (2012), which is appended to this petition at Appendix E, defines the term “employee” to mean “any individual employed by an employer.”

Section 203(g) of the FLSA, 29 U.S.C. § 203(g), defines “employ” as “to suffer or permit to work.”

The Department of Labor (DOL), Wage and Hour Division’s (WHD) Fact Sheet No. 71 on Internship Programs Under The Fair Labor Standards Act (April 2010)1 provides in pertinent part:

Covered and non-exempt individuals who are “suffered or permitted” to work must be

                                                            1 See DOL Fact Sheet No. 71, (April 2010), http://www.dol.gov/whd/regs/compliance/whdfs71.pdf, attached as Appendix F. The panel cited the six criteria listed in the Wage & Hour Manual (BNA) 91:416 (1975), which references “trainees” only. Pet’rs’ App. (hereinafter “App.”) A-7 n.2. The DOL reissued the same factors in 1980, but they again only expressly applied to “trainees” and “students.” See Employment Relationship Under the Fair Labor Standards Act, WH Pub. 1297, 4-5 (Rev. May 1980), http://www.cobar.org/repository/Inside_Bar/Labor/Employment%20Relationship.pdf. In April 2010, the DOL reissued the same factors to make clear they also apply to internships. The factors did not otherwise change. See DOL Fact Sheet No. 71, App. F.

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compensated under the law for the services they perform for an employer. Internships in the “for-profit” private sector will most often be viewed as employment, unless the test described below relating to trainees is met. Interns in the “for-profit” private sector who qualify as employees rather than trainees typically must be paid at least the minimum wage and overtime compensation for hours worked over forty in a workweek.

The Test for Unpaid Interns

There are some circumstances under which individuals who participate in “for-profit” private sector internships or training programs may do so without compensation. . . . The determination of whether an internship or training program meets this exclusion depends upon all of the facts and circumstances of each such program.

The following six criteria must be applied when making this determination:

1. The internship, even though it includes actual operation of the facilities of the employer, is similar to training which would be given in an educational environment;

2. The internship experience is for the benefit of the intern;

3. The intern does not displace regular employees, but works under close supervision of existing staff;

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4. The employer that provides the training derives no immediate advantage from the activities of the intern; and on occasion its operations may actually be impeded;

5. The intern is not necessarily entitled to a job at the conclusion of the internship; and

6. The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

If all of the factors listed above are met, an employment relationship does not exist under the FLSA, and the Act’s minimum wage and overtime provisions do not apply to the intern. This exclusion from the definition of employment is necessarily quite narrow because the FLSA’s definition of “employ” is very broad.

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STATEMENT OF THE CASE

Petitioners Risa Kaplan and Linda O’Neill are two former students of MedVance Institute, a private, for-profit college offering a Medical Billing and Coding Specialist degree program. Pet’rs’ App. A-3 (hereinafter “App.”). As part of this program, MedVance Institute required Petitioners to complete an unpaid externship, intended to provide students with the opportunity to apply the skills they learned at MedVance in the medical billing and coding field before graduating.2 App. C-2. Petitioners were each placed with local for-profit private sector employers where they spent the majority of their time making rote and repetitive calls to insurance companies to check on the status of insurance claims. App. B-2-3; C-1-2.

                                                            2 Petitioners refer to their work experiences with Respondents as “externships” because that is the term used by MedVance Institute. App. B-2. Although the DOL Fact Sheet No. 71 refers exclusively to “internships,” neither the district court nor the Eleventh Circuit distinguished between internships and externships. See generally App. A-C. Other courts also do not distinguish between work experiences that are part of a course of study at an educational institution, whether labeled an “internship” or an “externship.” See, e.g., Solis v. Laurelbrook Sanitarium & School, Inc., 642 F.3d 518, 526-28 (6th Cir. 2011) (discussing Marshall v. Baptist Hosp., Inc., 668 F.2d 234, 235-36 (6th Cir. 1981) in which the district court considered whether students at an X-ray technician two-year training program through Vanderbilt University Hospital were “employees” under the FLSA, but made no distinction based on whether the student was classified as an “extern” or an “intern”).

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Petitioners separately filed suit in different divisions of the Southern District of Florida against their respective extern sites, seeking minimum wage pay under the FLSA for the hours they spent performing work for the benefit of the for-profit private sector employers. App. A-4. They argued their externships were actually unpaid jobs, as Petitioners received no educational benefit from the experience, due to the rote, repetitive nature of the work they performed and the lack of supervision and instruction in working as a medical biller or coder. Id. Petitioners argued they instead conferred economic benefit on the respective defendants by performing work that otherwise would have been completed by paid employees. Id.; see also App. B-4; C-4.

The respective defendants each moved for, and were granted, summary judgment. App. A-4. Petitioners’ minimum wage claims turned on whether externs with for-profit private sector employers are “employees” under the FLSA. See 29 U.S.C. § 203(e)(1) (defining “employee” to mean “any individual employed by an employer.”); id. § 203(g) (defining “employ” as “to suffer or permit to work”).

In their summary judgment briefing before the district courts, defendants each relied on the DOL’s interpretation of the “trainee” exception to FLSA coverage, which this Court first articulated in Walling v. Portland Terminal Co., 330 U.S. 148, 152-53 (1947). The DOL had issued guidelines determining that interns with for-profit private

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sector employers “who receive training for their own education benefit” are exempt from FLSA protection “if the training meets” all six of the following criteria:

(1) the internship, even though it includes actual operation of the facilities of the employer, is similar to that which would be given in an educational environment; (2) the internship experience is for the benefit of the intern; (3) the intern does not displace regular employees, but works under close supervision of existing staff; (4) the employer that provides the training derives no immediate advantage from the activities of the intern; and on occasion its operations may actually be impeded; (5) the intern is not necessarily entitled to a job at the conclusion of the internship; and (6) the employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

See DOL Fact Sheet No. 71, App. F-2-3.

The district courts found, at the summary judgment phase, Petitioners were not “employees” under the FLSA and were therefore not entitled to minimum wage pay for the work performed on Respondents’ behalf. A-4; B-15; C-7. In reaching this conclusion, however, the district courts adopted different analyses. The Kaplan district

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court analyzed the economic realities of the relationship between Petitioners and their extern sites, and separately applied the DOL’s six-factor test. App. B-9.3 The O’Neill district court, on the other hand, rejected the economic realities test and looked only to Portland Terminal and its progeny. App. C-4-5.

On consolidated appeal, a panel of the Eleventh Circuit4 affirmed summary judgment, analyzing Petitioners’ externships in light of the economic realities and, separately, considering whether all six of the DOL factors were satisfied. App. A-7. The panel found Petitioners received academic credit and became eligible to receive their degrees as a result of completing the externships. App. A-6. Further, the panel found Respondents did not economically benefit from Petitioners’ work because at least some time was spent training and supervising Petitioners, resulting in less overall efficiency and some duplication of effort. App. A-7.

                                                            3 The Kaplan district court conflated the economic realities test and the totality of the circumstances test based on the DOL factors. See App. B-9 (“Under both Portland Terminal and the Department of Labor’s test, the test of employment under the Act is one of economic reality.”) (internal quotations omitted); App. B-15 (considering the “totality of the circumstances”). 4 On consolidated appeal, a third appellant, Yanno Bevacqua, sought review of the district court’s grant of summary judgment. As to him specifically, the Eleventh Circuit panel held his claims were barred by the statute of limitations and thus affirmed summary judgment. App. A-4. Bevacqua is not seeking certiorari review from this Court.

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Petitioners filed a timely petition for rehearing or rehearing en banc. The court of appeals denied the petition on April 10, 2013. App. D.

REASONS FOR GRANTING THE WRIT OF CERTIORARI

This Court should grant the petition for at least two reasons. The Eleventh Circuit’s panel decision implicates not one, but two circuit conflicts. First, the ruling deepens an acknowledged split over the proper test for determining whether an intern or extern falls within the narrow “trainee” exception to the FLSA’s broad minimum wage and overtime pay protections, or whether the intern or extern is an “employee” under Sections 203(e)(1), (g) of the FLSA. To make this determination, circuit courts of appeal are split as to whether an economic realities, primary benefit,5 or totality of the circumstances test should be applied.

Second, the Eleventh Circuit’s panel ruling also deepens a circuit split as to the deference, if any, owed to the DOL’s interpretation of this Court’s holding in Portland Terminal and its resulting six-factor test for determining whether an intern or

                                                            5 The “primary benefit” test and the “primary beneficiary” test are the same test and this Petition uses the names interchangeably. See, e.g., Laurelbrook, 642 F.3d at 527 (analyzing “whether the primary benefit from the relationship flowed to the learner or to the alleged employer”); McLaughlin v. Ensley, 877 F.2d 1207, 1209 (4th Cir. 1989) (“[C]onclud[ing] that the general test . . . is whether the employee or the employer is the primary beneficiary.”).

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extern is a “trainee” exempt from the FLSA protections guaranteed to an “employee.”

In Portland Terminal, this Court found the FLSA did not intend to “stamp all persons as employees . . . who might work for their own advantage on the premises of another” and held that a trainee who works “solely for his personal purpose or pleasure,” and “serves only his own interest” is not an “employee” under the FLSA. 330 U.S. at 152. Portland Terminal’, thus, created a narrow “trainee” exception to the “comprehensive coverage of employees” under the FLSA.6 United States v. Rosenwasser, 323 U.S. 360, 362 (1945). Accordingly, a for-profit business has not “suffered or permitted” an individual to work if the services are provided to satisfy his or her own interests rather than the interests of the business. Tony &

                                                            6 In fact, this Court in Portland Terminal warned courts against taking too expansive an approach to the “trainee” exception:

We have not ignored the argument that such a holding may open up a way for evasion of the law. But there are neither findings nor charges here that these arrangements were either conceived or carried out in such a way as to violate either the letter or the spirit of the minimum wage law. We therefore have no case before us in which an employer has evasively accepted the services of beginners at pay less than the legal minimum without having obtained permits from the administrator. It will be time enough to pass upon such evasions when it is contended that they have occurred.

330 U.S. at 153.

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Susan Alamo Found. v. Sec’y of Labor, 471 U.S. 290, 295 (1985); Portland Terminal, 330 U.S. at 152.

Additionally, the questions presented are important and recurrent. A growing number of students are completing unpaid internships or externships with for-profit private sector employers, often as a requirement of their degree programs. With current economic conditions, and absent clarity from this Court as to the test, employers may exploit students desperate for employment by seeking arrangements to acquire unpaid interns. Whether students participating in internships or externships with for-profit private sector employers7 should be compensated for their work under the FLSA is now increasingly the subject of litigation in federal courts throughout the country. Given the precipitous increase in lawsuits brought by interns or externs and the clear circuit

                                                            7 This petition for certiorari concerns only unpaid internships or externships with for-profit private sector employers, and does not concern such placements in the non-profit sector. See, e.g., Kitchings v. Fla. United Methodist Children’s Home, Inc., 393 F. Supp. 2d 1282, 1293-94 (M.D. Fla. 2005) (explaining non-profits are generally exempt from the FLSA because they are not “enterprises,” except to the extent the non-profit also engages in business activity); DOL Fact Sheet No. 71, App. F-1-2 (noting the six-factor test is intended to apply only to “for-profit private sector internships or training programs”). There is no dispute in this case that Respondents are “for-profit private sector” businesses. App. B-2, C-2.

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split that has emerged, this Court should intervene and resolve this dispute.

I. There is an Important Circuit Conflict Regarding the Proper Test for Determining When an Intern or Extern is a “Trainee” Excluded from the Minimum Wage and Overtime Pay Protections of an “Employee” Under Section 203(e)(1) of the FLSA and Regarding What Level of Deference, if any, to Afford to the DOL’s Six-Factor Test.

The Eleventh Circuit’s decision exacerbates what was already an entrenched circuit split regarding the proper test to apply when determining whether an intern or extern is an “employee” under Section 203(e)(1) of the FLSA. To make this determination, the Eleventh Circuit applies an economic realities test.8 App. A-6. The Fourth, Fifth, and Sixth Circuits apply a primary benefit test. See, e.g., Solis v. Laurelbrook Sanitarium & Sch. Inc., 642 F.3d 518, 529 (6th Cir. 2011); McLaughlin v. Ensley, 877 F.2d 1207, 1209 (4th Cir. 1989); Donovan v. Am. Airlines, Inc., 686 F.2d 267, 272 (5th Cir. 1982). The Tenth Circuit and lower courts within the Second Circuit9 apply a                                                             8 The Eleventh Circuit applied the DOL six-factor test as an alternative to the economics realities test, and held that all of the factors were satisfied, thus exempting the externs from FLSA coverage. App. A-7. It did not, however, consider other factors relevant to the primary benefit test. See infra Section I.A & I.B. 9 The Second Circuit will soon address the appropriate test to use concerning whether unpaid interns are “trainees” exempt from protection under the FLSA. See infra n.14 (citing Wang

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totality of the circumstances test rooted in the DOL’s six-factor test. See, e.g., Reich v. Parker Fire Prot. Dist., 992 F.2d 1023, 1027 (10th Cir. 1993); Glatt v. Fox Searchlight Pictures, Inc., No. 11 Civ. 6784 WHP, 2013 WL 2495140, at *12 (S.D.N.Y. June 11, 2013).

Additionally, there is a circuit split concerning the level of deference to afford the DOL’s six-factor test. The Sixth and Fourth Circuits do not afford the DOL six-factor test deference under Skidmore v. Swift & Co., 323 U.S. 134 (1944). See, e.g., Laurelbrook, 642 F.3d at 525-26; Ensley, 877 F.2d at 1209 n.2. The Eleventh and Tenth Circuits, and the Southern District of New York, afford various levels of deference to the test. See, e.g., App. A-7; Parker Fire, 992 F.2d at 1026; Fox Searchlight, 2013 WL 2495140, at *12; Wang v. Hearst, 12 CV 793 HB, 2013 WL 1903787, at *4 (S.D.N.Y. May 8, 2013), motion to certify appeal granted, No. 12 CV 793 HB, 2013 WL 3326650 (S.D.N.Y. June 27, 2013).

As a result of both circuit splits, it is now timely for this Court to determine which test should be applied to determine whether interns or externs are exempt from the FLSA and which level of deference, if any, should be afforded to the DOL six-factor test.

                                                                                                                       v. Hearst Corp., 12 CV 793 HB, 2013 WL 3326650 (S.D.N.Y. June 27, 2013)).

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A. There is an Important Circuit Split Concerning the Proper Test to Apply to Determine Whether an Intern or Extern Is an “Employee” Under the FLSA.

(1) The Eleventh Circuit’s Economic Realities Test

The panel in this case used an economic realities test to determine the student externs were not “employees” under the FLSA. App. A-6-7. The Eleventh Circuit has previously used the economic realities test in FLSA cases to determine generally whether an employment relationship exists, see Donovan v. New Floridian Hotel, Inc., 676 F.2d 468, 470-71 (11th Cir. 1982), but never, until now, to determine whether an intern or extern is exempt from FLSA protection.

Although neither the panel in this case, nor the appellate court in New Floridian Hotel, defined the economic realities test,10 the Eleventh Circuit has held it includes inquiries into (1) the nature of the employer’s control over the work; (2) the employee’s opportunity for profit or loss; (3) the employee’s investment in equipment required for his task; (4)

                                                            10 The Eleventh Circuit previously articulated the economic realities test as an inquiry into: “whether the alleged employer (1) had the power to hire and fire the employees, (2) supervised and controlled employee work schedules or conditions of employment, (3) determined the rate and method of payment, and (4) maintained employment records.” Villarreal v. Woodham, 113 F.3d 202, 205 (11th Cir. 1997) (quoting Bonnette v. Cal. Health & Welfare Agency, 704 F.2d 1465, 1470 (9th Cir. 1983)).

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whether the services rendered require special skill; (5) the duration of the working relationship; and (6) the extent to which the services rendered are integral to the employer’s business. See Scantland v. Jeffry Knight, Inc., No. 12-12614, --- F.3d ---, 2013 WL 3585635, at *2-3 (11th Cir. July 16, 2013) (utilizing the economic realities test in the context of determining whether an independent contractor was an “employee” under the FLSA). This test is derived from Usery v. Pilgrim Equipment Co., 527 F.2d 1308 (5th Cir. 1976) and Rotherford Food Corp. v. McComb, 331 U.S. 722, 727 (1947).11 See Jeffry Knight, Inc., 2013 WL 3585635, at *3 n.2.

Before this case, the Eleventh Circuit’s economic realities test has more often been applied in the context of determining whether an independent contractor was an “employee” under the FLSA, see, e.g., id. at *3 n.2., and had not been used to                                                             11 The term “economic reality” first appeared in United States v. Silk, 331 U.S. 704, 713 (1947) (“‘employees’ included workers who were such as a matter of economic reality.”), abrogated by Nationwide Mut. Ins. Co. v. Darden, 503 U.S. 318 (1992). This Court used this language for the first time in the FLSA context in Goldberg v. Whitaker House Cooperative, Inc., 366 U.S. 28, 33 (1961) where it held “the ‘economic reality’ rather than ‘technical concepts’ is to be the test of employment.” This Court has never, however, addressed the proper test for determining when an intern or extern is an “employee” under the FLSA. Nor has this Court addressed the proper deference to afford the DOL’s “trainee” or “internship” guidelines. Indeed, much of this Court’s jurisprudence concerning economic realities in the FLSA context was decided before the advent of the modern era of internships and externships. See, e.g., Whitaker, 366 U.S. at 33 (applying the term to “homeworkers”).

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determine whether an individual qualifies as a “trainee” under the Act. Indeed, the Eleventh Circuit’s economic realities test is not derived from Portland Terminal, see id., which is the applicable authority governing the “trainee” exception to the FLSA. See infra Section I.A.2-3. Moreover, the economic realities test, which addresses factors such as whether the contractor has the opportunity to profit or suffer financial loss from the employer’s business and whether the contractor invests his own equipment, has little applicability to the intern or extern context, which necessarily arises within an educational or learning experience.

Applying the economic realities test in the “trainee” context is contrary to the tests applied in the Fourth, Sixth, and Tenth Circuits, and lower courts within the Second Circuit, and conflicts with this Court’s precedent in Portland Terminal. See infra Section III (addressing this conflict). Indeed, the Sixth Circuit has criticized the economic realities test in the context of determining whether a student is an “employee” under the FLSA: “To state that economic realities govern is no more helpful than attempting to determine employment status by reference directly to the FLSA’s definitions themselves. There must be some ultimate question to answer, factors to balance, or some combination of the two.” Laurelbrook, 642 F.3d at 522-23.

The Sixth Circuit’s criticism of the economic realities test concerns, in part, its imprecision. Id. at 522. Additionally, although an employment

17

 

relationship “is not fixed by labels that parties may attach to their relationship nor by common law categories nor by classification under other statutes,” to state that such a relationship is governed by economic realities does nothing more than state a conclusion. Id. (quoting Powell v. U.S. Cartridge Co., 339 U.S. 497, 528 (1950)).

(2) The Fourth, Fifth, and Sixth Circuits’ Primary Benefit Test

The Fourth, Fifth, and Sixth Circuits apply a primary benefit test, which involves “focusing on the benefits flowing to each party . . . .” Laurelbrook, 642 F.3d at 529 (citing Portland Terminal, 330 U.S. at 152); see also Ensley, 877 F.2d at 1209 (“[T]his court has concluded that the general test used to determine if an employee is entitled to the protections of the Act is whether the employee or the employer is the primary beneficiary of the trainees’ labor.”); Donovan, 686 F.2d at 272 (affirming the “district court’s finding that trainees gain the greater benefit from their experience”).12

To determine whether an employee is covered by the FLSA in a “learning situation,” the Sixth Circuit considers factors such as whether “the relationship displaces paid employees and whether                                                             12 The Eighth Circuit implicitly applies a primary benefits test, but also references the economic realities, which further demonstrates the confusion of the circuit courts in applying the “trainee” exception. See Blair v. Wills, 420 F.3d 823, 829 (8th Cir. 2005) (holding that chores performed by teenagers at boarding school were primarily for students’ benefit).

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there is educational value derived from the relationship.” Laurelbrook, 642 F.3d at 529. Other factors may be considered as well. Id.

Moreover, the primary benefits test “readily captures the distinction the FLSA attempts to make between trainees and employees,” and most closely resembles the inquiry suggested by this Court’s decision in Portland Terminal. Id. (citing Portland Terminal, 330 U.S. at 152). This consistency is particularly evident because this Court in Portland Terminal found the training “most greatly benefit[ted] the trainees” and “[a]ccept[ed] the unchallenged findings . . . that the railroads receive no ‘immediate advantage’ from any work done by the trainees….” Portland Terminal, 330 U.S. at 149 (emphasis added).13

The District Court for the Southern District of New York, however, held the primary beneficiary test “has little support in [Portland Terminal]” because “[t]he Supreme Court did not weigh the

                                                            13 The Fourth Circuit and lower courts within the Third Circuit have similarly interpreted the focus of Portland Terminal. See e.g., Isaacson v. Penn Cmty. Servs., Inc., 450 F.2d 1306, 1309 (4th Cir. 1971) (“The rationale of Portland Terminal would seem to be that the railroad received no ‘immediate advantage’ from the trainees’ services. To state it otherwise, the principal purpose of the seemingly employment relationship was to benefit the person in the employee status.”); Todaro v. Twp. of Union, 27 F. Supp. 2d 517, 534 (D.N.J. 1998) (characterizing Portland Terminal as “concluding that participation in railroad training program did not constitute employment under FLSA where primary benefit redounded to trainees”).

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benefits to the trainees against those of the railroad, but relied on findings that the training program served only the trainees’ interests and that the employer received ‘no “immediate advantage” from any work done by the trainees.’” Fox Searchlight, 2013 WL 2495140, at *11 (quoting Portland Terminal, 330 U.S. at 153 (emphasis added)) (noting also that the primary benefits test is “subjective and unpredictable”).

(3) The Tenth Circuit’s and U.S. District Court for the Southern District of New York’s Totality of the Circumstances Test

Courts in the Tenth Circuit and lower courts in the Second Circuit14 exclusively apply a totality of the circumstances test directly rooted in the DOL’s six-factor test. See, e.g., Parker Fire., 992 F.2d at 1026; Fox Searchlight, 2013 WL 2495140, at *11. These courts consider the same six factors

                                                            14 The Second Circuit Court of Appeals will expressly address whether the “trainee” exception to the FLSA applies to interns, including those receiving college credit for their internship. The district court in Hearst Corp. recently certified for appeal pursuant to 28 U.S.C. § 1292(b): whether the totality of the circumstances test applied in Hearst and Fox Searchlight is the appropriate legal standard for determining the employee status of unpaid interns under the FLSA in light of Portland Terminal and the DOL six-factor test. 2013 WL 3326650. Previously, the Second Circuit addressed the issue in the context of domestic service workers, not unpaid interns. See Velez v. Sanchez, 693 F.3d 308, 326, 330 (2d Cir. 2012) (stating it “does not depend on isolated factors but rather upon the circumstances of the whole activity,” and noting that a key consideration was “who is the primary recipient of benefits from the relationship”).

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articulated in the DOL’s Fact Sheet No. 71, App. F, but reject the DOL’s argument that all six factors must be satisfied because an analysis based on the totality of circumstances is warranted under Portland Terminal. See, e.g., Parker Fire, 992 F.2d at 1026-27 (all six factors are relevant, but no one factor dispositive); Fox Searchlight, 2013 WL 2495140, at *12 (same); Hearst, 12 CV 793 HB, 2013 WL 1903787, at *4 (“While the weight to be given to these factors is far from crystal clear, the Fact Sheet adds to the confusion with the introductory language, ‘whether an internship or training program meets this exclusion depends upon all of the facts and circumstances of each such program.’”); Archie v. Grand Cent. P’ship, Inc., 997 F. Supp. 504, 532 (S.D.N.Y. 1998) (Sotomayor, J.) (applying the six-factor test, but finding neither the approach in Portland Terminal nor the DOL test “relies exclusively on a single factor, but instead requires consideration of all the circumstances”). Cf. DOL Fact Sheet No. 71, App. F-3 (“If all of the factors listed above are met, an employment relationship does not exist under the FLSA, and the Act’s minimum wage and overtime provisions do not apply to the intern.”) (emphasis added). Although the Eleventh Circuit panel alternatively applied the DOL six-factor test, it did not expressly address whether all factors must be satisfied, but concluded that all were satisfied. App. A-7-8.

The Fourth and Sixth Circuits have expressly rejected the DOL six-factor test. See Laurelbrook, 642 F.3d at 525 (finding the DOL test “to be a poor method for determining employee status in a

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training or educational setting”); Ensley, 877 F.2d at 1209 n.2 (noting it does not apply the DOL test because case law within the circuit better articulates the primary beneficiary test as the applicable standard); see also infra Section I.B (addressing the circuit split concerning the level of deference applied to the DOL six-factor test and why several circuits have rejected it).

As demonstrated, the federal circuit courts do not apply the same test to determine whether interns or externs are “trainees” and thus exempt from the protections of the FLSA. This Court should resolve this dispute of national importance.

B. There is an Important Circuit Split Concerning the Appropriate Level of Deference, if any, to Afford to the DOL’s Six-Factor Test.

The Eleventh Circuit in this case deepened what was already a well-defined circuit split concerning the level of deference to afford to the DOL’s six-factor test. The DOL has generally taken the position that its test for determining whether a “trainee” or intern is an “employee” is entitled to Skidmore deference. See Laurelbrook, 642 F.3d at 525 (noting the DOL’s position).

An agency’s “policy statements, embodied in its compliance manual and internal directives,” which interpret regulations and statutes the agency is charged with enforcing, are entitled to a “measure of respect” under Skidmore. Fed. Express Corp. v. Holowecki, 552 U.S. 389, 399 (2008). It is

22

 

established law, however, that “[t]he weight [given an administrative] judgment in a particular case will depend upon the thoroughness evident in its consideration, the validity of its reasoning, its consistency with earlier and later pronouncements, and all those factors which give it power to persuade, if lacking power to control.” Skidmore, 323 U.S. at 140.

The Sixth Circuit expressly acknowledged a circuit split concerning the level of deference afforded the DOL test:

Courts differ on whether the [Wage and Hour Division’s (WHD)] test is entitled to controlling weight in determining employee status in a training context. Some courts have said that the test is entitled to “substantial deference.” See, e.g., Atkins v. Gen. Motors Corp., 701 F.2d 1124, 1128 (5th Cir. 1983). Others have rejected it altogether. See, e.g., McLaughlin v. Ensley, 877 F.2d 1207, 1209-10 & n.2 (4th Cir. 1989). Still others strike a balance and consider the factors as relevant but not dispositive to the inquiry. See, e.g., Reich v. Parker Fire Prot. Dist., 992 F.2d 1023, 1027 (10th Cir. 1993); see also Harris v. Vector Mktg. Corp., 753 F. Supp. 2d 996, 1006-07 (C.D. Cal. 2010).

Laurelbrook, 642 F.3d at 525.

The Eleventh Circuit panel held the DOL six-factor test, although not “controlling,” was “pertinent” to determining whether an intern or

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extern qualifies as an employee under the FLSA. App. A-7-8. It concluded that all the factors were present, but did not analyze whether all must be satisfied in order to meet the “trainee” exception. See id. (citing Skidmore, 323 U.S. at 140).

The Sixth Circuit affords the DOL test no deference because, first, it is “a poor method for determining employee status in a training or educational setting.” Laurelbrook, 642 F.3d at 525. Second, it is inconsistent with this Court’s reasoning in Portland Terminal, which “suggests that the ultimate inquiry in a learning or training situation is whether the employee is the primary beneficiary of the work performed.” Laurelbrook, 642 F.3d at 525. Third, it is “rigid” and “inconsistent with a totality-of-the-circumstances approach, where no one factor (or the absence of one factor) controls.” Id.

The Fourth Circuit has similarly rejected the DOL test and, in doing so, granted it no Skidmore deference. See Ensley, 877 F.2d at 1209 & n.2. In Ensley, the court expressly noted that it did not rely on the DOL six-factor test because its “clear precedent,” which dictates the application of the primary benefit test, provided the “proper analysis.” Id. at 1209 n.2 (citing Wirtz v. Wardlaw, 339 F.2d 785, 787-88 (4th Cir. 1964) (applying Portland Terminal, but distinguishing it because the employer “benefited from [the purported employees’] labor,” and the purported employees’ efforts did not serve their own interests “exclusively”)); see also Isaacson v. Penn Cmty.

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Servs., Inc., 450 F.2d 1306, 1309 (4th Cir. 1971) (“The rationale of Portland Terminal would seem to be that the railroad received no ‘immediate advantage’ from the trainees’ services. To state it otherwise, the principal purpose of the seemingly employment relationship [in Portland Terminal] was to benefit the person in the employee status.”).

The Tenth Circuit, on the other hand, has found the DOL test is entitled to diminished persuasive force because there is little support for the test’s “all or nothing” approach, which is inconsistent with past WHD interpretations and opinions endorsing a flexible approach. See Parker Fire, 992 F.2d at 1026-27.15 Although the Tenth Circuit considers all the factors, it does not limit its analysis to only those six factors identified by the DOL. See id. at 1028. Rather, the Court also considers “whether the training was for the benefit of the trainees, and whether defendant derived an immediate advantage from the activities of the trainees.” Id. The Tenth Circuit has noted that “weighing the relative benefits to each party” is helpful under the analysis. Id.

Finally, courts in the Southern District of New York have applied Skidmore deference to some of                                                             15 Indeed, the DOL test on its face is not clear: on the one hand, the DOL requires that all six factors be met in order for the intern to be exempt from FLSA coverage, while on the other hand, the DOL encourages courts to consider “all of the facts and circumstances of each such program.” DOL Fact Sheet No. 71, App. F-2; see also Hearst, 2013 WL 1903787, at *4.

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the DOL factors, but rejected others. See, e.g., Fox Searchlight, 2013 WL 2495140, at *12, *13 (rejecting the sixth factor because it is irrelevant whether an intern understood he or she was supposed to be compensated, as protections under the FLSA cannot be waived); Hearst, 2013 WL 1903787, at *4-5 (same, but explicitly referring to Skidmore, 323 U.S. 134).

As demonstrated, a circuit split has emerged concerning the proper level of deference to afford the DOL’s six-factor test determining when a “trainee,” intern, or extern is an “employee” under the FLSA. This Court should not entitle the DOL test to Skidmore deference because certain factors violate this Court’s precedent, and its all-or-nothing approach conflicts with both the DOL’s past pronouncements and this Court’s precedent. See infra Section III.

For all these reasons, this Court should grant certiorari to resolve the important circuit splits concerning the proper test for determining when an intern or extern is a “trainee” excluded from FLSA minimum wage and overtime protections and the proper level of deference to afford to the DOL test.

II. This Case Presents the Ideal Vehicle for Addressing When an Intern or Extern is a “Trainee” Exempt from FLSA Protection and the Level of Deference Afforded to the DOL Six-Factor Test.

This case is an excellent vehicle for addressing the questions presented because the Eleventh

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Circuit panel’s application of its economic realities test was outcome determinative. That is, if Petitioners’ cases had been brought in a circuit applying the primary benefit test, and rejecting the economic realities test and DOL test, the outcome of the case likely would have been different.

The Eleventh Circuit’s economic realities test differs from the primary benefit test and the totality of the circumstances test in several key ways. First, the economic realities test is not derived from this Court’s precedent in Portland Terminal, which expressly concerned whether “trainees” were exempt from FLSA protection. Compare Woodham, 113 F.3d at 205 (identifying factors such as whether the employer had the power to hire and fire the employees and determined the rate and method of payment, among other factors not pertaining to a “trainee,” intern, or extern situation), with Portland Terminal, 330 U.S. at 152-53 (considering to whom the primary benefit of the railroad trainees’ work flowed). Thus, the elements of the economic realities test provide no guidance concerning whether an intern or extern qualifies as a “trainee” under the FLSA, which necessarily arises within an educational or learning context. Second, to say that “economic realities govern” is merely a conclusion and does not provide a test that guides the lower courts. See Laurelbrook, 642 F.3d at 522-23; see also infra Section III (addressing how this test conflicts with this Court’s precedent). Third, the economic realities test does not determine to whom the primary benefit flows – economic or otherwise –

27

 

nor does it evaluate the quality or sufficiency of the educational experience. Cf. Laurelbrook, 642 F.3d at 526-28 (analyzing with approval Marshall v. Baptist Hosp., 473 F. Supp. 465, 474-76 (M.D. Tenn. 1979), rev’d on other grounds, 668 F.2d 234 (6th Cir. 1981), which assessed whether the educational program at issue was “sound” and considered the sufficiency of the training and supervision).

Similarly, the totality of the circumstances test, rooted in the six-factor DOL test, also does not assess to whom the primary benefit of the relationship flows. See supra Section I.A (comparing the tests and identifying the six factors). Rather, the test addresses six factors, one of which directly conflicts with this Court’s precedent, and none of which assesses whether the training was “deficient” or otherwise sound. See Laurelbrook, 642 F.3d at 526-28; see also supra Sections I.A-I.B (addressing the circuit splits).

The Fourth Circuit’s decision in Ensley aptly demonstrates how courts reach different conclusions on the same facts, depending on which test they apply. 877 F.2d at 1209-10. There, the district court applied the DOL’s six-factor test and determined that individuals who spent a week training by shadowing employees and helping them in their tasks were not “employees” under the FLSA. See id. at 1208. The Fourth Circuit reversed, holding the district court should have applied the primary beneficiary test and had it done so, it would have been required to consider “the nature of

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the training experience” and “whether [the defendant] or the new workers principally benefited from the weeklong orientation arrangement.” Id. at 1209-10. In that case, both of these factors demonstrated “the very limited and narrow kinds of learning that took place,” and showed “the trainees were taught only simple specific job functions related to [the defendant’s] own business.” Id. Thus, on the same facts, the application of different tests yielded different results. Moreover, the dissent, applying the DOL six-factor test, would have upheld the district court’s findings, again demonstrating the differing results when different tests are applied. Id. at 1210-11.

The Sixth Circuit’s discussion of the primary benefit test, as applied in Marshall v. Baptist Hospital, demonstrates how Petitioners’ cases would have come out differently under this test.16 In Baptist Hospital, students at an X-ray technician two-year clinical training program who worked in a hospital in order to receive their degree were found to be “employees” under the FLSA. See Laurelbrook, 642 F.3d at 526-28 (citing Baptist Hosp., 668 F.2d at 235). In applying the primary benefit test, the lower court considered not only the

                                                            16 In Laurelbrook, the Sixth Circuit reviewed the district court’s application of the primary benefit test in Marshall v. Baptist Hospital, and noted that it had previously reversed on another issue, “but had expressly agreed with both the district court’s test for employee status and its application of the test.” 642 F.3d at 527 (citing Baptist Hosp., 473 F. Supp. at 468-77; 668 F.2d at 239).

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“immediate economic benefit” to the employer, but also analyzed to whom the primary benefit of the work flowed and the quality of the educational experience, noting that “the training was deficient, [and] the educational benefits were slight . . . .” Id. at 528. “[B]ecause the trainees were shortchanged educationally,” the court found the employer was “the primary benefactor from the relationship between it and the trainees.” Id. Thus, utilizing the primary benefit test, the district court in Baptist Hospital considered “the validity of the program as an educational experience” and “whether the primary benefit from the relationship flow[ed] to the learner or to the alleged employer.” Baptist Hosp., 473 F. Supp. at 468.

Here, the Eleventh Circuit applied the economic realities test, and, alternatively, the DOL six-factor test. App. A-6-7. The panel did not address the non-existent nature of Petitioners’ educational experience, or otherwise consider the quality of the training experience. Rather, the panel heavily relied on the fact that Petitioners received academic credit for their work and were eligible to earn their degrees. App. A-6. Because courts must address all aspects of the educational experience to determine the primary beneficiary of the relationship, whether the student receives academic credit is not dispositive. See, e.g., Laurelbrook, 642 F.3d at 523-24 (applying the primary benefit test and rejecting the argument that no vocational students can be “employees” under the FLSA because a “full consideration of the realities surrounding its program” is required

30

 

under Supreme Court precedent). Indeed, no one factor is dispositive under the primary benefit analysis.

Thus, under neither the economic realities test, nor the DOL six-factor test, did the panel in this case consider all the realities of the extern placement, including which party received the primary benefit. App. A-6-8. If it had done so, a different outcome likely would have resulted. The fact that applying different tests yields different outcomes makes this case an ideal vehicle for determining the proper test to apply and the level of deference, if any, to afford the DOL factors. Considering the FLSA is a federal statute, a consistent test should be applied throughout the country so the FLSA’s coverage concerning minimum wage and overtime pay is not dictated by the circuit in which an intern or extern works.

III. The Eleventh Circuit’s Decision Conflicts with this Court’s Precedent. The Eleventh Circuit’s decision is incorrect for

three distinct reasons. First, the panel applied an economic realities test, which conflicts with this Court’s holding in Portland Terminal. Second, the panel’s application of the DOL six-factor test conflicts with this Court’s decisions in Portland Terminal and Tony & Susan Alamo Foundation. Third, the panel placed great weight on the fact that Petitioners received academic credit for their work, a factor that is not dispositive in any of the three tests, and which conflicts with this Court’s

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precedent in Powell v. U.S. Cartridge Co., 339 U.S. 497 (1950).

A. The Panel’s Economic Realities Test Conflicts with This Court’s Precedent in Portland Terminal.

The economic realities and DOL six-factor tests are distinct from the primary benefit test. See supra Section II. Under the Eleventh Circuit’s economic realities test, which before this case has never been used to determine whether the “trainee” exception to the FLSA applies, various factors are considered, including: whether the alleged employer “(1) had the power to hire and fire the employees, (2) supervised and controlled employee work schedules or conditions of employment, (3) determined the rate and method of payment, and (4) maintained employment records.” Woodham, 113 F.3d at 205; see also Jeffry Knight, Inc., 2013 WL 3585635, at *2-3 (listing additional factors to be considered including the employee’s opportunity for profit or loss, the employee’s investment in equipment required for his task, whether the services rendered require special skill, the duration of the working relationship, and the extent to which the services rendered are integral to the employer’s business).

These factors bear no resemblance to the facets of the employment relationship this Court found significant in Portland Terminal. For example, in Portland Terminal, this Court considered: whether regular employees were displaced by the trainees; whether the business was impeded during the

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training; whether there was supervision; and whether the purported employees received training relevant to an actual position at the employer’s business. 330 U.S. at 150. This Court held the training “most greatly benefit[ed]” the trainees and it “[a]ccept[ed] the unchallenged findings . . . that the [employer] receive[ed] no ‘immediate advantage’ from any work done by the trainees.” Id. at 153. Thus, only after considering a number of factors and weighing the benefit the trainees and employer received, did this Court determine the trainees were exempt under the FLSA.

Given the factors addressed in Portland Terminal, it is clear that a primary benefit test in which all the facts, including the relative benefit flowing to each party, are assessed “readily captures the distinction the FLSA attempts to make between trainees and employees” and is the most consistent with this Court’s precedent in Portland Terminal. See Laurelbrook, 642 F.3d at 529 (citing Portland Terminal, 330 U.S. at 152); see also Ensley, 877 F.2d at 1209 (considering Portland Terminal and holding the primary beneficiary test should be applied).

As addressed above, circuit courts applying the primary benefit test in the wake of Portland Terminal indeed address the benefit the trainee receives by assessing all facets of the relationship and the educational experience. See, e.g., Laurelbrook, 642 F.3d at 526-29, 532; Ensley, 877 F.2d at 1209-10. Utilizing the economic realities test, the Eleventh Circuit did not assess the nature

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of the work Petitioners performed, whether they emerged from the program trained generally for jobs in coding and billing or merely trained to work for Respondents, or the lack of supervision over Petitioners. See App. A-6-8. Nor did the panel consider – under the economic realities test – the rote or repetitive nature of the tasks each Petitioner completed, including spending 80% to 99% of their time checking the status of insurance claims. See App. B-3; App. C-2. The panel similarly did not assess the benefit Petitioners received, or lack thereof, nor did it evaluate the other factors related to the quality of the educational experience under the DOL six-factor test. See App. A-7-8. Courts applying the primary benefit test after Portland Terminal have found all of these factors relevant. See, e.g., Laurelbrook, 642 F.3d at 526-29 (considering deficiency of the training program); Ensley, 877 F.2d at 1209-10 (reversing the district court because it did not consider the “narrow kinds of learning that took place.”).

For all these reasons, the Eleventh Circuit’s economic realities test is inconsistent with this Court’s holding in Portland Terminal, which properly supports application of the primary beneficiary test.

B. The Panel’s Consideration of the DOL Factors Conflicts with this Court’s Precedent in Portland Terminal and Tony & Susan Alamo Foundation.

The panel in this case alternatively applied the DOL six-factor test, which is inconsistent with this

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Court’s holdings in Portland Terminal and Tony & Susan Alamo Foundation. App. A-7-8. In doing so, it held all six factors were satisfied, and thus the Petitioners were exempt from the minimum wage protections of the FLSA. Id.

The panel’s consideration of the DOL factors conflicts with Portland Terminal because the Court made clear the nature of the work and training, should be considered without limitation. See 330 U.S. at 152-53. Indeed, there is nothing in Portland Terminal to suggest either that all of the DOL factors must be satisfied or that courts should not consider factors beyond the six factors expressly identified. See Parker Fire, 992 F.2d at 1026-28 (rejecting the “all or nothing” approach as unsupported by Portland Terminal and suggesting the use of a totality of the circumstances approach that was not limited to the six factors, including weighing the relative benefit to the trainee and the employer).

The panel’s consideration of the sixth DOL factor also conflicts with this Court’s precedent in Tony & Susan Alamo Foundation. 471 U.S. at 301. The sixth factor concerns whether “[t]he employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.” DOL Fact Sheet No. 71, App. F-3.

This Court made clear in Tony & Susan Alamo Foundation:

[T]he purposes of the Act require that it be applied even to those who would decline its

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protections. If an exception to the Act were carved out for employees willing to testify that they performed work “voluntarily,” employers might be able to use superior bargaining power to coerce employees to make such assertions, or to waive their protections under the Act.

471 U.S. at 302. These protections are for both the employees and businesses, as they ward against anticompetitive business practices: “An employer is not to be allowed to gain a competitive advantage by reason of the fact that his employees are more willing to waive [FLSA claims] than are those of his competitor.” Brooklyn Sav. Bank v. O’Neil, 324 U.S. 697, 710 (1945).

Thus, whether an intern or extern understands he or she is not entitled to wages for the time spent in the internship or externship is irrelevant to determining whether the intern or extern is an “employee” under the FLSA, and it violates this Court’s precedent. See Fox Searchlight, 2013 WL 2495140, at *13 (disregarding this factor entirely because it violates this Court’s precedent in Tony & Susan Found., 471 U.S. 299).17

                                                            17 Indeed, the Fourth Circuit noted the narrowness of Portland Terminal when it stated that Portland “merely held that learners or apprentices taking a training course under an agreement that compensation should not be paid them were not to be deemed employees within the meaning of the act; but the court made it very clear that all whose employment contemplated compensation were protected by the act . . . .” McComb v. Homeworkers’ Handicraft Coop., 176 F.2d 633,

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For all these reasons, the panel’s consideration of the DOL six-factor test was error, as the sixth factor directly conflicts with this Court’s precedent, and the primary benefit test best applies the relevant factors addressed by this Court in Portland Terminal.

C. The Panel’s Consideration of Whether Petitioners Received Academic Credit Conflicts with this Court’s Precedent in U.S. Cartridge Co. and is Not Dispositive.

The Eleventh Circuit panel placed great weight on the fact that Petitioners received academic credit for their externship program. See App. A-6-7. Under any of the tests, the receipt of academic credit should not be dispositive.

The Sixth Circuit rejected the argument that a vocational student, who receives credit for the work placement, is categorically exempt from the FLSA because no vocational students can be “employees” under the FLSA. Laurelbrook, 642 F.3d at 523-24. There is no support in Portland Terminal for such a categorical approach. Determining “employee” status by reference to labels used by the parties is inappropriate. See U.S. Cartridge Co., 339 U.S. at 528-30. Moreover, there is no authority to support the contention that an educational institution’s decision to award academic credit has any bearing on whether the unpaid intern or extern is an

                                                                                                                       639 (1049). This Court has since made clear that no party can waive their statutory protections under the FLSA. See Tony & Susan Found., 471 U.S. at 301, 302.

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“employee” under the FLSA or state law equivalents.

The Eleventh Circuit panel twice mentioned that Petitioners received academic credit. App. A-6-8. Concluding Petitioners are not employees largely because they are students in a vocational program is the kind of labeling this Court has determined courts must resist. See U.S. Cartridge Co., 339 U.S. at 528-30. The panel used this conclusion to bypass a thorough consideration of the Petitioners’ relationship with the employer, which is antithetical to settled jurisprudence in Portland Terminal, which called for consideration of the nature of the educational situation to determine whether the “trainee”, or unpaid intern or extern in this case, is the primary beneficiary of the work performed. Portland Terminal, 330 U.S. at 152-53.

Moreover, courts applying the primary benefit test have rejected such categorical considerations. See, e.g., Reich v. Shiloh True Light Church of Christ, 895 F. Supp. 799, 819 (W.D.N.C. 1995) (holding that children enrolled in church-run vocational training program were employees), aff'd per curiam, 85 F.3d 616 (4th Cir. 1996) (unpublished table decision); Baptist Hosp., 473 F. Supp. at 477 (holding that X-ray technicians-in-training enrolled in two-year, accredited college program were “employees”); see also id. at 468 n.3 (providing example of where improper labeling likely resulted in arguably incorrect finding of non-“employee” status (citing Bobilin v. Bd. of Educ., 403 F. Supp. 1095, 1106 (D. Haw. 1975))).

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For all these reasons, the panel placed too great a weight on the fact that Petitioner received academic credit for their extern placement. This Court has rejected such labeling. Thus, the panel’s decision conflicted with this Court’s precedent.

CONCLUSION

For all these reasons, this Court should grant this Petition on the questions presented.

Dated: August 7, 2013 Respectfully submitted,

MATTHEW SARELSON Counsel of Record CHRISTIAN LEVESQUE CONRAD & SCHERER, LLP 633 South Federal Highway Fort Lauderdale, Florida 33301 (954) 847-3358 msarelson@conradscherer.com Counsel for Petitioners