Ann McLaughlin Secretary of Labor, United States Department of Labor v. Kirby G. Ensley ( 1989 )

CHAPMAN, Circuit Judge:

This case involves the meaning of “employee” as it applies to rights under the Fair Labor Standards Act, 29 U.S.C. § 201 et seq. (1982). More precisely, the issue is whether certain workers, who performed duties for an employer during a weeklong orientation period, were employees for purposes of the Fair Labor Standards Act’s minimum wage and overtime provisions. Because we believe these workers should have been considered employees, we reverse.

I

The defendant in this action, Kirby Ens-ley, is the proprietor of a snack foods distribution business in Sylva, North Carolina. At the time of the events relative to this action, Ensley employed route men to drive his company trucks, to restock vending machines, and to sell “potato chips, candy, crackers, and peanuts” on a commission basis to retailers. The employees’ income derived entirely from commission sales. They generally worked Monday through Friday, and sometimes on Saturday, for a total of about 50 to 60 hours per week.

Before hiring persons for route jobs, Ensley required them to participate in what was usually five days of exposure to the tasks they would be expected to perform. The parties agree that Ensley did not pay any form of compensation to the potential routemen during this week. During the week, which included about 50-60 hours of labor, the potential routeman traveled an ordinary route with an experienced route-man. They loaded and unloaded the delivery truck, restocked stores with Ensleys’ product, were given instruction on how to drive the trucks, were introduced to retailers, were taught basic snack food vending machine maintenance, and occasionally helped in preparing orders of goods and with financial exchanges.

At trial, conflicting evidence was introduced as to whether Ensley’s business benefited from the new workers’ activities. Ensley himself claimed that the trainees may have hindered normal operations. The testimony of two experienced drivers was that the extra hands naturally made their work load lighter. Similarly, there was disagreement as to the extent to which formal hiring was contingent on completion of the program. Ensley maintained that the training did not guarantee a future job. Yet there was evidence that no person, who had completed the training, was not subsequently hired.

After the government presented its case against Ensley to the jury, the defendant moved for a directed verdict, which, on the issue now before this court, was granted by the district court. Relying particularly on Walling v. Portland Terminal Co., 330 U.S. 148, 67 S.Ct. 639, 91 L.Ed. 809 (1947), Donovan v. American Airlines, Inc., 686 F.2d 267 (5th Cir.1982), and Isaacson v. Penn Community Services, Inc., 450 F.2d 1306 (4th Cir.1971), the court concluded that the determination of whether one is an employee for purposes of the Act is a legal question not reserved to the jury. After discussing generally the propositions that work under close scrutiny, work which does not displace other employees, and work which does not expedite a company’s business are factors which help reveal whether a worker is an employee for purposes of the Act, the court determined that in light of plaintiff’s evidence, the route-men in training were not employees. The court then proceeded to consider how the six-part test, developed by the Wage and Hour Division to aid in its own determinations of when a so-called trainee is really an employee, should be applied in this case.¹

The court believed that the instruction provided by Ensley was similar to that given in a vocational school for outside salesmen, that the training was for the benefit of the students, that the trainees did not displace regular workers, that Ens-ley derived no immediate advantage from the activities of the trainees, that the trainees were not necessarily entitled to a job, and that both parties understood that the new workers were not to receive wages.

II

The starting point for an analysis of the question posed are the companion cases of Portland Terminal, supra, and Walling v. Nashville, Chattanooga and St. Louis Ry., 330 U.S. 158, 67 S.Ct. 644, 91 L.Ed. 816 (1947). There, the Supreme Court addressed at some length the relationship between training that is not covered by the Act and employment that invokes its protection. The Court considered that “[without doubt the Act covers trainees, beginners, apprentices, or learners if they are employed to work for an employer for compensation.” More accurately, however, the issue is whether such trainees are “employed,” and the Act defines employ as “to suffer or permit to work.” Despite the broadness of this definition, the Court believed that it “obviously” excluded those without a promise of compensation who worked for their own advantage on another’s property, and did not “make a person whose work serves only his own interest an employee of another person who gives him aid and instruction.” Similarly, the Act was not intended to penalize employers for instruction that will “greatly benefit” the trainees. Finally, it would be important to consider whether an employer received any work of “immediate advantage” from the employee. Portland Terminal, 330 U.S. at 151-53, 67 S.Ct. at 640-42.

This court has not had many opportunities to consider Portland Terminal. Although it has applied the case from an early date, see McComb v. Homeworkers’ Handicraft Cooperative, 176 F.2d 633, 639 (4th Cir.1949) (stating that Portland Terminal “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.”), and Walling v. Norfolk Southern Ry. Co., 162 F.2d 95, 96 (4th Cir.1947) applying the holding of Portland Terminal to a factually identical case), it was not until Wirtz v. Wardlaw, 339 F.2d 785 (4th Cir.1964), and Penn Community Services, supra, that this court offered a broad discussion of the issue.

In Wardlaw, which involved the hiring by an insurance salesman of two women at less than minimum wages, the court held that the women were entitled to minimum wages and overtime compensation. Distinguishing the case from Portland Terminal, the court found it determinative that the employer’s interests were served by the women’s work and that he “benefited from their labors.” Wardlaw, 339 F.2d at 788. In Penn Community Services, the court held that Portland Terminal had established that when “the employer received no ‘immediate advantage’ from the trainees’ services,” that is, when “the principal purpose of the seemingly employment relationship was to benefit the person in the employee status,” the worker could not be brought under the Act. Penn Community Services, 450 F.2d at 1308. In sum, this 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.

Ill

As a result, the proper legal inquiry in this case is whether Ensley or the new workers principally benefited from the weeklong orientation arrangement.² There are several facts that serve to illustrate the relative degrees of benefit. The most important of these relate directly to the nature of the training experience. The evidence established that the workers drove trucks, loaded and unloaded trucks, restocked retail store shelves and vending machines, learned basic food vending machine maintenance, and performed simple kinds of paperwork.

This recitation of the weeks’ events establishes the very limited and narrow kinds of learning that took place, and requires a conclusion that the district court misapplied the controlling legal principle to the facts in evidence by granting the directed verdict. The prospective employees were simply helping to service a route, and the instruction they received did not rise to the level that one would receive in a general, vocational course in “outside salesmanship.” The trainees were taught only simple specific job functions related to Ens-ley’s own business.

By applying these factual circumstances to the legal question of which party received the principal benefit, it becomes plain that Ensley received more advantage than the workers. Ensley, without cost to himself, obtained employees able to perform at a higher level when they began to receive pay. Ensley also received a free opportunity to review job performance, and he received the benefit of aid to his regular employees while they performed their normal duties. These new workers were, in fact, helping Ensley to distribute his snack foods. On the other hand, it is clear that the workers received very little. As noted above, the skills learned were either so specific to the job or so general to be of practically no transferable usefulness. The brevity of the training period helps to underscore this fact. Finally, there was no credible evidence that a person who completed the training was not subsequently hired, suggesting that the new workers should be considered at-will employees from the beginning.

For the above reasons we conclude that those persons, who participated in the orientation program and are properly identified as such, are entitled to be considered as covered employees under the Fair Labor Standards Act and to receive minimum wages for one week of work. Accordingly, we reverse the judgment of the district court.

1 . The six criteria, all of which must be met before Wage and Hour determines there is no employment relationship, are: (1) the training, even though it includes actual operation of the facilities of the employer, is similar to that which would be given in a vocational school, (2) the training is for the benefit of the trainees, (3) the trainees do not displace regular employees, but work under close observation, (4) the employer that provides the training derives no immediate advantage from the activities of the trainees and on occasion his operations may actually be impeded, (5) the trainees are not necessarily entitled to a job at the completion of the training period, and, (6) the employer and the trainees understand that the trainees are not entitled to wages for the time spent in training. Wage and Hour Manual (BNA) 91:416 (1975).

2 . We do not rely on the formal six-part test issued by the Wage and Hour Division. Instead, because of the clear precedent of Wardlaw and Penn Community Services, we believe proper analysis derives from the principles stated in those cases.