FLSA2004-16 — Pre-employment training and employment relationship

U.S. Department of Labor
Employment Standards Administration
Wage and Hour Division
Washington, D.C. 20210

October 19, 2004
FLSA2004-16
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Dear
Name*,

This is in response to your letter concerning the 1969 Stipulation that your client, Name*, entered into
with the Department of Labor. The Stipulation was also the subject of our meeting here in Washington,
and we thank you for the helpful information you have provided.

The purpose of the Stipulation was to establish the conditions under which people attending training
courses sponsored by
Name* would be considered employees under the Fair Labor Standards Act, 29
U.S.C. 201 et seq. (“FLSA”). The Stipulation also was intended to provide a standard for
Name* and its
franchisees to insure that they were in compliance with the FLSA with regard to their trainees.

Name* offers training in the tax code and the completion of tax returns for the company’s customers in
courses which are open to the public, including
Name* competitors. The trainees are not guaranteed
employment with
Name* but a significant number are ultimately employed by Name*. Name*
franchisees conduct the same training under the same conditions as
Name*. Name* and its franchisees
wish to screen applicants to its courses, and screening criteria would include the applicant’s current or
possible future employment with a competitor of
Name*.

As you point out, since the Stipulation was signed, a number of cases have been decided concerning
whether individuals engaged in pre-employment training may be considered employees under the FLSA.
See , e.g, McLaughlin v. Ensley, 877 F.2d 1207 (4
th
Cir. 1989); Donovan v. Trans World Airlines, 726 F.2d
415 (8
th
Cir. 1984); Donovan v. American Airlines, 686 F.2d 267 (5
th
Cir. 1982).

Based on the holdings in these cases, the Wage and Hour Division issued an opinion letter dated January
30, 2001, 2001 WL 1558755 (DOL WAGE-HOUR), which you have cited in your letter. The opinion letter
describes the circumstances under which trainees are considered to be employees, taking into account
the changes that have occurred in this area of the law since 1969. In view of the guidance provided in the
opinion letter, the 1969 Stipulation is no longer binding on
Name* or its franchises.

We do not believe that it is necessary to enter into a new stipulation. The January 30, 2001 opinion letter
provides the guidance necessary to achieve FLSA compliance under these circumstances, stating the six
conditions the Wage and Hour Division considers necessary for such trainees not to be considered
employees (which are set out below).

The FLSA applies to individuals who are “employees”, as that term is interpreted under the Act. The term
“employ” is defined in section 3(g) of the Act, 29 U.S.C. 203(g), as “to suffer or permit to work.” Ordinarily
that term is defined broadly, but its reach is not unlimited. The Supreme Court has held that individuals
working for another for their own benefit without expectation of compensation may not be employees. See
Walling v. Portland Terminal Company, 330 U.S. 148 (1947). Whether trainees are employees under the
FLSA will depend upon all of the circumstances surrounding their activities on the premises of the
employer. If all six of the following criteria apply, the trainees are not employees within the meaning of the
FLSA:

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 their close observation.
4. The employer that provides the training derives no immediate advantage from the activities of the
trainees; and on occasion operations may actually be impeded.
5. The trainees are not necessarily entitled to a job at the conclusion of the training period.
6. The employer and the trainees understand that the trainees are not entitled to wages for the time
spent in training.

U.S. Department of Labor
Employment Standards Administration
Wage and Hour Division
Washington, D.C. 20210

If Name* and its franchisees conduct their training operations in a manner consistent with these six
criteria and the guidance in the January 30, 2001 opinion letter, their trainees will not be considered
employees under the FLSA.

This opinion is based exclusively on the facts and circumstances described in your request and is given
on the basis of your representation, explicit or implied, that you have provided a full and fair description of
all the facts and circumstances which would be pertinent to our consideration of the question presented.
Existence of any other factual or historical background not contained in your request might require a
different conclusion than the one expressed herein.

I trust that the above information is responsive to your concerns.

Sincerely,

Alfred B. Robinson, Jr.
Acting Administrator

Note: * The actual name(s) was removed to preserve privacy.

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