Solis v. Laurelbrook Sanitarium and School, Inc.

RECOMMENDED FOR FULL-TEXT PUBLICATION

Pursuant to Sixth Circuit Rule 206

File Name: 11a0106p.06

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

_________________

X

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HILDA SOLIS, Secretary of Labor, U.S.

Plaintiff-Appellant, --

Department of Labor,

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No. 09-6128

,

>

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v.

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LAURELBROOK SANITARIUM AND SCHOOL,

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INC.,

Defendant-Appellee. N

Appeal from the United States District Court

for the Eastern District of Tennessee at Chattanooga.

No. 07-00030—Curtis L. Collier, Chief District Judge.

Argued: March 11, 2011

Decided and Filed: April 28, 2011

Before: KENNEDY and MARTIN, Circuit Judges; MURPHY, District Judge.*

_________________

COUNSEL

ARGUED: Maria Van Buren, UNITED STATES DEPARTMENT OF LABOR,

Washington, D.C., for Appellant. Deborah A. Ausburn, FSB LEGAL COUNSEL, A

FISHER BROYLES LLP, Woodstock, Georgia, for Appellee. ON BRIEF: Maria Van

Buren, Paul L. Frieden, UNITED STATES DEPARTMENT OF LABOR, Washington,

D.C., for Appellant. Deborah A. Ausburn, FSB LEGAL COUNSEL, A FISHER

BROYLES LLP, Woodstock, Georgia, David J. Myers, FSB LEGAL COUNSEL, A

FISHER BROYLES LLP, Alpharetta, Georgia, for Appellee.

*

The Honorable Stephen J. Murphy, III, United States District Judge for the Eastern District of

Michigan, sitting by designation.

1

No. 09-6128 Solis v. Laurelbrook Sanitarium and School Page 2

_________________

OPINION

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STEPHEN J. MURPHY, III, District Judge. Acting on a tip from a concerned

citizen, the Wage and Hour Division of the U.S. Department of Labor commenced an

investigation into potential child labor violations committed by Laurelbrook Sanitarium

and School, Inc. (“Laurelbrook”). After concluding that Laurelbrook had violated the

child labor provisions of the Fair Labor Standards Act of 1938, 29 U.S.C. §§ 201-219

(“FLSA” or “Act”), Department of Labor Secretary Hilda Solis (“Secretary”) filed suit

in federal court seeking prospective injunctive relief against future violations. After a

seven-day bench trial, the district court denied the Secretary’s request for a permanent

injunction on the ground that Laurelbrook students are not “employees” for purposes of

the FLSA, thus rendering the Act’s prohibitions on child labor inapplicable to

Laurelbrook’s operations. We AFFIRM.

I

The district court made findings of fact, summarized below, to which we must

defer unless clearly erroneous. Fed. R. Civ. P. 52(a)(6). Facts not specially found by

the district court, but included below for completeness, are undisputed.

Founded in 1950 by a group of Seventh-Day Adventists, Laurelbrook is a non-

profit corporation located in Dayton, Tennessee. Laurelbrook follows the philosophy

and teachings of the Seventh-Day Adventist Church and its founder, Ellen G. White,

which include the view that children are to receive an education with a practical training

component.

In conformity with its beliefs, Laurelbrook operates a boarding school for

students in grades nine through twelve, an elementary school for children of staff

members, and a 50-bed intermediate-care nursing home that assists in the students’

practical training (the Sanitarium). The school has been approved and accredited by the

Tennessee Department of Education since the 1970s. The State of Tennessee accredits

No. 09-6128 Solis v. Laurelbrook Sanitarium and School Page 3

certain private schools through independent authorized accrediting agencies. The E.A.

Sutherland Education Association (EASEA) is one such agency, whose purpose is to

consider and adjudicate requests for accreditation from self-supporting (as opposed to

denominational) schools, like Laurelbrook, which are operated by members of the

Seventh-Day Adventist Church. Laurelbrook is currently accredited through EASEA.

Students in Laurelbrook’s boarding school learn in both academic and practical

settings, spending four hours of each school day in the classroom and four hours learning

practical skills. The two aspects of the education are integrated, and all teachers instruct

in both settings. Laurelbrook’s stated mission is the “education of young people,

providing a balanced program of spiritual, academic and vocational training to high

school students (grades nine through twelve) with a goal of reproducing the character

of God and preparing for His service.” Students learn practical skills, in part, so they

can later serve as missionaries in foreign lands. Boarding students keep busy with

“wholesome activities” that teach them practical skills about “work, responsibility, [and]

the dignity of manual labor,” and that contribute to maintaining Laurelbrook’s

operations.

Laurelbrook offers the following vocational courses: Agriculture, Building Arts,

Grounds Management, Mechanical Arts, Office Procedures, Plant Services, Water

Services, Certified Nursing Assistant (“CNA”), Child Development, Environmental

Services, and Food Service. The Sanitarium is an integral part of Laurelbrook’s

vocational training program. As part of their training, students are assigned to the

Sanitarium’s kitchen and housekeeping departments. Students sixteen and older may

participate in the CNA program, which is approved by the State of Tennessee licensing

authority. Students who receive their CNA certification may then be assigned to the

Sanitarium to provide medical assistance to patients. Students assist patients in relation

to the students’ training and in line with Laurelbrook’s guiding philosophy of education.

Laurelbrook receives Medicaid funding for the care it provides at the Sanitarium.

The Sanitarium is staffed such that if the students were not training there, staff

members could continue to provide the same patient services. But since the Sanitarium

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is integral to the education the school provides, Laurelbrook would not operate the

Sanitarium if the school did not exist. In other words, the Sanitarium’s sole purpose is

to serve as a training vehicle for students. Therefore, the district court reasoned, students

do not displace adult workers or other employees who might be willing to work at the

Sanitarium.

Many of Laurelbrook’s practical training courses (16 of 25) are approved by the

Tennessee Department of Education for transfer credit. Several others are approved as

“special courses,” meaning a transferee school can accept the courses at its discretion.

Students learn to use tools associated with specific trades, and the learning experience

is similar to that received in vocational training courses at public schools. Adult staff

members adequately supervise students and provide reasonable safeguards to protect

them from hazardous activities. Laurelbrook has performed reasonably well in ensuring

student safety.

Students do not receive wages for duties they perform. They are not entitled to

a job with Laurelbrook upon graduation, and are expected to move on after graduation.

Laurelbrook provides “important tangible benefits and intangible training” and

its students “reap great benefits” from the training and education provided. Any benefits

Laurelbrook derives from its students are “secondary to its religious mission” of

providing academic and practical training. Therefore, the district court reasoned, any

such benefits are “much less” than those received by the students.

Laurelbrook does not compete for labor. Its vocational program compares

favorably with programs operated by public high schools in the area. But because

Laurelbrook operates a boarding school, it cannot compare perfectly with a public school

where students are only in school for part of the day. Laurelbrook is responsible for its

boarding students at all times, and its efforts to keep the students gainfully occupied are

in keeping with its religious mission to teach students moral character.

In February 2007, the Secretary brought this action to enjoin future violations of

29 U.S.C. §§ 212(a), 212(c), and 215(a)(4), as well as Child Labor Regulation 3, 29

No. 09-6128 Solis v. Laurelbrook Sanitarium and School Page 5

C.F.R. §§ 570.31-.37. The district court conducted a seven-day bench trial between

August 19, 2008 and April 6, 2009, and subsequently denied the Secretary’s request for

a permanent injunction in a written order. The basis for the decision was that

Laurelbrook students were not “employees” under the FLSA, thus rendering the Act

inapplicable to Laurelbrook’s entire operation. To reach this result, the district court

considered the benefits each party received from the work performed, and concluded that

the primary benefit of the work students performed at Laurelbrook ran to themselves, not

Laurelbrook.

The Secretary timely appealed.

II

The issue before us is whether the district court erred in concluding that students

at Laurelbrook are not employees under the FLSA. There is no settled test for

determining whether a student is an employee for purposes of the FLSA. The district

court applied what the parties characterize as a “primary benefit test” and considered

which party (school or student) receives the primary benefit of the work the student

performs. The Secretary claims this was error. She contends instead that the proper test

is the one the Department of Labor’s Wage and Hour Division (“WHD”) has formulated

for persons participating in employer-sponsored training programs. Under this test, the

Secretary contends, Laurelbrook’s students are employees. We must address two

questions to decide this appeal: 1) whether the district court used the correct legal

standard; and 2) whether the district court properly applied the correct standard. We

answer both in the affirmative.

A

We begin with the applicable standards of review. “Whether a particular

situation is an employment relationship is a question of law.” Fegley v. Higgins, 19 F.3d

1126, 1132 (6th Cir. 1994). Therefore, we review de novo the district court’s ruling that

Laurelbrook students are not employees. Id. The district court relied on various factual

findings it made after a bench trial. We review these findings for clear error but review

No. 09-6128 Solis v. Laurelbrook Sanitarium and School Page 6

de novo the district court’s application of the legal standard to them. Sec’y of Labor,

U.S. Dep’t of Labor v. 3Re.com, Inc., 317 F.3d 534, 537 (6th Cir. 2003). “A district

court’s factual findings are clearly erroneous if, based on the entire record, we are left

with the definite and firm conviction that a mistake has been committed.” Shelby Cnty.

Health Care Corp. v. Majestic Star Casino, 581 F.3d 355, 364-65 (6th Cir. 2009)

(citation and internal quotation marks omitted).

B

The FLSA prohibits the use of “oppressive child labor” in commerce or in the

production of goods for commerce. 29 U.S.C. § 212(c). The prohibition is premised on

an employment relationship. See id. § 203(l). While the Act does define the terms

“employee,” “employer,” and “employ,” see id. § 203(e)(1) (“[T]he term ‘employee’

means any individual employed by an employer.”); id. § 203(d) (“‘Employer’ includes

any person acting directly or indirectly in the interest of an employer in relation to an

employee . . . .”); id. § 203(g) (“‘Employ’ includes to suffer or permit to work.”), the

definitions are exceedingly broad and generally unhelpful, see Henthorn v. Dep’t of

Navy, 29 F.3d 682, 684 (D.C. Cir. 1994) (“The Act provides generally unhelpful

definitions of its critical terms.”); cf. Nationwide Mut. Ins. Co. v. Darden, 503 U.S. 318,

323 (1992) (noting that identical definition of employee under ERISA “is completely

circular and explains nothing”). Despite the broad definitions, the concept of

employment under the FLSA is not limitless. Tony & Susan Alamo Found. v. Sec’y of

Labor, 471 U.S. 290, 295 (1985). One such limitation is that “[a]n individual who,

‘without promise or expectation of compensation, but solely for his personal purpose or

pleasure, work[s] in activities carried on by other persons either for their pleasure or

profit,’ is outside the sweep of the Act.” Id. (quoting Walling v. Portland Terminal Co.,

330 U.S. 148, 152 (1947)).

Whether an employment relationship exists under a given set of circumstances

“is not fixed by labels that parties may attach to their relationship nor by common law

categories nor by classifications under other statutes.” Powell v. U.S. Cartridge Co., 339

U.S. 497, 528 (1950). Rather, it is the “economic reality” of the relationship between

No. 09-6128 Solis v. Laurelbrook Sanitarium and School Page 7

parties that determines whether their relationship is one of employment or something

else. Alamo, 471 U.S. at 301 (quoting Goldberg v. Whitaker House Coop., Inc., 366

U.S. 28, 33 (1961)). “The issue of the employment relationship does not lend itself to

a precise test, but is to be determined on a case-by-case basis upon the circumstances of

the whole business activity.” Donovan v. Brandel, 736 F.2d 1114, 1116 (6th Cir. 1984)

(citing Rutherford Food Corp. v. McComb, 331 U.S. 722, 730 (1947)).

While the Secretary and Laurelbrook agree that economic realities govern here,

there is considerable dispute between them regarding the more specific inquiry we

should undertake in this instance. 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.

For example, in distinguishing between employees and independent contractors,

courts have focused on “whether, as a matter of economic reality, the worker is

economically dependent upon the alleged employer or is instead in business for himself.”

See, e.g., Hopkins v. Cornerstone Am., 545 F.3d 338, 343 (5th Cir. 2008). To guide the

inquiry, courts consider factors such as the degree of control exercised by the alleged

employer, the extent of the relative investments of the worker and the alleged employer,

the degree to which the worker’s opportunity for profit or loss is determined by the

alleged employer, the skill and initiative required in performing the job, and the

permanency of the relationship. Id. No one factor is dispositive, nor can the “collective

answers to all of the inquiries produce a resolution which submerges the dominant

factor—economic dependence. . . . The five tests are aids—tools to be used to gauge the

degree of dependence of alleged employees on the business with which they are

connected. It is dependence that indicates employee status.” Usery v. Pilgrim Equip.

Co., Inc., 527 F.2d 1308, 1311-12 (5th Cir. 1976). Each factor must be applied with the

ultimate notion of dependence in mind. Id. We have applied this general framework.

See, e.g., Fegley, 19 F.3d at 1132 n.6; Brandel, 736 F.2d at 1116-17, 1120; see also

Imars v. Contractors Mfg. Servs., Inc., No. 97-3543, 1998 WL 598778, at *2-6 (6th Cir.

No. 09-6128 Solis v. Laurelbrook Sanitarium and School Page 8

Aug. 24, 1998) (per curiam) (discussing our precedent on this issue); cf. Lilley v. BTM

Corp., 958 F.2d 746, 750 (6th Cir. 1992) (applying economic reality test in case

involving Age Discrimination in Employment Act).

We must first determine the specific test to apply in assessing whether

employment is present in a training or learning situation. Both sides propose different

tests, which we now consider. Laurelbrook’s proposed test is categorical, rather than

fact-based. It contends that its status as an accredited vocational school should

conclusively resolve this litigation in its favor because the Supreme Court has held that

the FLSA does not apply to students attending vocational schools. In Walling v.

Portland Terminal Co., 330 U.S. 148 (1947), the Supreme Court held that prospective

railroad brakemen training for the position through the railroad’s training program were

not employees under the FLSA. Discussing the FLSA, the Court noted:

The definition “suffer or permit to work” was obviously not intended to

stamp all persons as employees who, without any express or implied

compensation agreement, might work for their own advantage on the

premises of another. Otherwise, all students would be employees of the

school or college they attended, and as such entitled to receive minimum

wages. . . . Had these trainees taken courses in railroading in a public or

private vocational school, wholly disassociated from the railroad, it could

not reasonably be suggested that they were employees of the school

within the meaning of the Act.

Id. at 152-53. Laurelbrook asserts that the Court’s prime example of a non-employee

is a vocational student. According to Laurelbrook, there is no need to analyze whether

its students are employees because no vocational school students can be employees

under the FLSA.

We disagree with the foregoing approach. For starters, we find the passage in

Portland Terminal to be dicta because the Court was not considering a vocational

school; it was considering an employer-based training program. Moreover, as a district

court in this circuit has indicated, the passage was likely intended merely to “point out

the absurdity of regarding as employment a student’s regular school work performed

primarily for its educational value.” Marshall v. Baptist Hosp., Inc., 473 F. Supp. 465,

No. 09-6128 Solis v. Laurelbrook Sanitarium and School Page 9

468 n.3 (M.D. Tenn. 1979), rev’d on other grounds, 668 F.2d 234 (6th Cir. 1981). So,

for example, “students required to perform a limited amount of varied cafeteria duty as

an integrated part of a planned course of study in, for example, home economics should

not be regarded as employees.” Id.

More importantly, as noted above, determining employee status by reference to

labels used by the parties is inappropriate. Powell, 339 U.S. at 772. And concluding

that students are not employees simply because they are students at a vocational school

is precisely the type of labeling courts must resist. Such an approach bypasses any real

consideration of the economic realities of the relationship and is antithetical to settled

jurisprudence calling for consideration of the totality of the circumstances of each case.

Indeed, courts have in the past determined that students in vocational training programs

were nevertheless employees under the FLSA. 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., Haw., 403 F. Supp. 1095, 1106 (D. Haw. 1975))). The

district court in this case likewise declined to apply such a test. We reject Laurelbrook’s

proposal that we resolve this appeal by concluding that the FLSA categorically does not

apply to accredited vocational training programs. Laurelbrook’s status as a vocational

school cannot serve as a substitute for a full consideration of the realities surrounding

its program.

The Secretary urges the application of a six-factor test created by the WHD to

distinguish between employees and trainees. The test is laid out in the WHD’s

Field Operations Handbook and in a publication it issued for general public

consideration. See Employment Relationship Under the Fair Labor Standards

Act, WH Pub. 1297 (Rev. May 1980), available at

No. 09-6128 Solis v. Laurelbrook Sanitarium and School Page 10

http://www.osha.gov/pls/epub/wageindex.download?p_file=F11973/WH1297.pdf. The

portion of the publication relating to trainees reads in its entirety as follows:

TRAINEES

The Supreme Court has held that the words “to suffer or permit to

Work”, as used am [sic] the Act to define “employ”, do not make all

persons employees who, without any express or implied compensation

agreement, may work for their own advantage on the premises of

another. Whether trainees or students are employees of an employer

under the Act will defend [sic] upon all of the circumstances surrounding

their activities on the premises of the employer. If all of the following

criteria apply, the trainees or students are not employees within the

meaning of the Act:

(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 or students;

(3) the trainees or students 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 or students, and on occasion

his operations my actually be impeded;

(5) the trainees or students are not necessarily entitled to a job at the

conclusion of the training period; and

(6) the employer and the trainees or students understand that the trainees

or students are not entitled to wages for the time spent in training.

WH Pub. 1297, at 4-5.

The Secretary contends that both the test and her determination that it applies

here are entitled to deference under Skidmore v. Swift & Co., 323 U.S. 134 (1944).1

Under so-called Skidmore deference, 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.” Fed. Express

1

The Secretary does not contend that the six-factor test is entitled to deference under Chevron,

U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837 (1984).

No. 09-6128 Solis v. Laurelbrook Sanitarium and School Page 11

Corp. v. Holowecki, 552 U.S. 389, 399 (2008). “The 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.

Courts differ on whether the WHD’s 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., --- F. Supp. 2d ----, 2010 WL 4588967, at *8 (C.D. Cal. Nov. 5,

2010).

We find the WHD’s test to be a poor method for determining employee status in

a training or educational setting. For starters, it is overly rigid and inconsistent with a

totality-of-the-circumstances approach, where no one factor (or the absence of one

factor) controls. See Rutherford Food, 331 U.S. at 730 (“We think, however, that the

determination of the relationship does not depend on such isolated factors but rather

upon the circumstances of the whole activity.”). Moreover, at least one court has found

the test’s all-or-nothing approach inconsistent with prior WHD interpretations and

opinions endorsing a flexible approach, thereby diminishing any persuasive force the test

might be entitled to under Skidmore. See Parker Fire, 992 F.2d at 1026. Furthermore,

the test is inconsistent with Portland Terminal itself, which, as outlined below, suggests

that the ultimate inquiry in a learning or training situation is whether the employee is the

primary beneficiary of the work performed. While the Secretary’s six factors may be

helpful in guiding that inquiry, the Secretary’s test on the whole is not.

Eschewing the positions taken by both parties, the district court focused on which

party receives the primary benefit of the work performed by Laurelbrook students. This

No. 09-6128 Solis v. Laurelbrook Sanitarium and School Page 12

was the appropriate inquiry to make. The test finds solid grounding in the Supreme

Court’s decision in Portland Terminal, where, as noted above, the Court considered

whether persons training to become railroad brakemen were employees of the railroad

sponsoring the training program. 330 U.S. at 149. The Court began by setting out the

guiding rationale for the decision: that the FLSA was “obviously not intended to stamp

all persons as employees who, without any express or implied compensation agreement,

might work for their own advantage on the premises of another.” Id. at 152. It

considered various factors, including whether the men displaced the railroad’s paid

employees, whether the men impeded the railroad’s business during training, whether

the men were supervised, and whether the men received training relevant to the position

of a railroad brakeman. After finding the training “most greatly benefit[ted]” the

trainees and “accepting the unchallenged findings . . . that the railroads receive no

‘immediate advantage’ from any work done by the trainees,” the Court concluded that

the men were not employees for purposes of the FLSA. Id. at 153.

Courts have read Portland Terminal as focusing principally on the relative

benefits of the work performed by the purported employees. 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”). While the

Supreme Court found various other facets of the relationship significant, in our view, its

decision rested upon whether the trainees received the primary benefit of the work they

performed.2

2

The Secretary inaccurately characterizes Portland Terminal as creating a six-factor test for

trainee status. While the Court’s recitation of the facts included those that resemble the Secretary’s six

factors, see 330 U.S. at 149-50, the Court gave no indication that such facts must be present in future cases

to foreclose an employment relationship.

No. 09-6128 Solis v. Laurelbrook Sanitarium and School Page 13

Our reading of Portland Terminal finds support in our precedent. While we have

not directly spoken to the issue, we have suggested that identifying the primary

beneficiary of a relationship provides the appropriate framework for determining

employee status in the educational context. See Baptist Hosp., 668 F.2d at 236. Baptist

Hospital involved a two-year program for persons training to become X-ray technicians

through Vanderbilt University Hospital, and later through a junior college. Graduates

received an associate’s degree and were eligible to sit for the Radiologic Technician

(“RT”) certification test. Id. at 235. Baptist Hospital was one of the program’s member-

hospitals that provided clinical training for students. The Secretary of Labor brought an

action against the hospital seeking back wages for students and an injunction. After a

bench trial, the district court concluded that the students were employees and that the

hospital could not escape liability through good-faith reliance on an administrative

interpretation relating to X-ray technician students. Id. at 236. We reversed on the issue

of reliance, but expressly agreed with both the district court’s test for employee status

and its application of that test. Id. at 239.

Because we approved of the district court’s decision regarding employee status

without discussion, review of the district court’s analysis is instructive. The analysis

began with a recognition of the “evils” the FLSA targets: displacement of regular

employees and exploitation of labor. In examining any training or educational situation

for possible signs of these evils, the court thought it relevant to consider both the validity

of the program as an educational experience and whether the primary benefit from the

relationship flowed to the learner or to the alleged employer. Id. at 468. Though the

court mentioned other factors as relevant, see. id. at 468 n.4, it never applied them in its

analysis.

With these principles in mind, the district court reviewed the details of Baptist

Hospital’s training program. First off, the training was deficient. Instead of placing

students with employed RTs who would instruct students on proper X-ray procedures

and supervise their performance, the program many times assigned students to areas of

the hospital staffed only by other students. And even those students assigned to areas

No. 09-6128 Solis v. Laurelbrook Sanitarium and School Page 14

generally staffed by RTs often found themselves working alone or with other students,

as the RTs were frequently reassigned to areas where they were needed most. Students

staffed the chest X-ray rooms and frequently performed portable X-rays by themselves.

Students often performed functions that relieved RTs and other employees from such

duties. Id. at 472. Students also displaced RTs in more substantive ways. For instance,

chest X-rays were the most common procedures at the hospital, at one time constituting

nearly 40% of all procedures performed. Virtually all chest X-rays were performed by

the students, whom the hospital did not pay. Additionally, students worked shifts

assigned originally to employed RTs. The record was clear that were it not for the

students’ performance of essential tasks, the hospital would have had to hire more

employees or require its regular employees to work overtime. Id. at 473.

After review of the facts, the district court found the students were employees

under the FLSA. The determination turned on the court’s finding that the hospital

received the primary benefit of the training program:

It is beyond question that the defendant received direct and

substantial benefit from the work performed by trainees, work that would

otherwise have been done by regular employees and work for which the

hospital charged patients at full rates. Had the training program been

found to be educationally sound the court might nevertheless have

concluded that the bulk of the benefit inured to the trainees, but because

the trainees were shortchanged educationally the court finds that the

hospital was the primary benefactor from the relationship between it and

the trainees. Simply stated, the hospital exploited the training program,

turning it to its own advantage. . . .

In view of the circumstances of the whole activity as set out in the

foregoing findings, the court concludes that the activities of the trainees

while on duty at Baptist Hospital transcended those of a bona fide

training situation and became those of employees. The economic reality

is that the trainees functioned as an integral part of the operation of the

Radiology Department without pay.

Id. at 476-77 (footnote omitted).

The best reading of Baptist Hospital is that the district court ultimately was

searching for the party who received the primary benefit of the relationship. But see

No. 09-6128 Solis v. Laurelbrook Sanitarium and School Page 15

Parker Fire, 992 F.2d at 1026 (characterizing Baptist Hospital as applying WHD’s six-

factor test). The court’s consideration of both employee displacement and educational

validity was made in furtherance of the ultimate determination of primary benefit. Both

factors assisted in determining concretely which party primarily benefitted. Using

students instead of paid employees for essential functions provided a substantial and

immediate economic benefit to the hospital. The only benefits the students received

from the arrangement were educational. But because the training was deficient, the

educational benefits were slight. As the court noted, “[h]ad the training program been

found to be educationally sound the court might nevertheless have concluded that the

bulk of the benefit inured to the trainees, but because the trainees were shortchanged

educationally the court finds that the hospital was the primary benefactor from the

relationship between it and the trainees.” Id. at 476-77. Given that the balance of

benefits ran decidedly in favor the hospital, the court deemed the students employees.

Decisions from courts outside our circuit apply a primary benefit test to

determine employment status. Some do so expressly. See McLaughlin, 877 F.2d at 1209

(“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.”); Donovan v. Am. Airlines, Inc., 686 F.2d

267, 272 (5th Cir. 1982) (“In this respect, the district court’s balancing [of relative

benefits] analysis appears to us to be more appropriate.”); Isaacson, 450 F.2d at 1309;

Wirtz v. Wardlaw, 339 F.2d 785, 788 (4th Cir. 1964); Shiloh True Light Church, 895 F.

Supp. at 817-18; Lane v. Carolina Beauty Sys., Inc., No. 6:90CV00108, 1992 WL

228868, at *6 (M.D.N.C. July 2, 1992) (“[B]ecause the benefits to Plaintiff derived from

the teacher training program clearly outweighed the benefits to CBS, Plaintiff was not

an ‘employee’ under the FLSA . . . .”).

Still others courts implicitly have applied a primary benefit test. See Blair v.

Wills, 420 F.3d 823, 829 (8th Cir. 2005) (holding that chores performed by teenager at

boarding school he was ordered to attend as part of juvenile sentence were, as a matter

of law, not “work”; though chores performed by students defrayed costs school would

No. 09-6128 Solis v. Laurelbrook Sanitarium and School Page 16

have incurred had it hired employees to perform tasks, chores were integral part of

educational curriculum and were primarily for students’ benefit); Woods v. Wills, 400

F. Supp. 2d 1145, 1166 (E.D. Mo. 2005), aff’d per curiam, 225 F. App’x 420 (8th Cir.

2007); Donovan v. Am. Airlines, Inc., 514 F. Supp. 526, 533-35 (N.D. Tex. 1981) (“If

the ultimate issue, as we believe it to be, is whether American has effectively assimilated

these trainees into its work force in such a fashion that they are employees in economic

reality, then an important analytical focus must be the relative benefits flowing to trainee

and company during the training period.”), aff’d, 686 F.2d 267 (5th Cir. 1982); Bailey

v. Pilots’ Ass’n for the Bay & River Del., 406 F. Supp. 1302, 1307 (E.D. Pa. 1976)

(holding pilot apprentice was “employee” where his duties “were of immediate benefit”

to pilot association, in that he substituted for paid employees and received no real

training from association’s apprenticeship program); Bobilin, 403 F. Supp. at 1108

(recognizing that mandatory cafeteria duty performed by students provided economic

value to state, but finding that students were not employees given that duties served

educational goals); see also Atkins, 701 F.2d at 1128 (approving of Secretary’s six-factor

test, yet focusing entirely on whether employer derived immediate benefit from trainees’

activities).

We find that a primary benefit test provides a helpful framework for discerning

employee status in learning or training situations. By focusing on the benefits flowing

to each party, the test readily captures the distinction the FLSA attempts to make

between trainees and employees. See Portland Terminal, 330 U.S. at 152 (stating that

FLSA is not intended to reach persons “who, without any express or implied

compensation agreement, might work for their own advantage on the premises of

another.”). The test is pitched at an appropriate level of generality to enable it to reach

non-employer-based training relationships, such as those provided in schools, and can

take into consideration the unique nature of the training situation presented here. It also

helps to readily identify relationships Congress sought to stamp out by enacting the

FLSA’s child labor provisions: relationships that place adult employees in competition

with minors. See Lenroot v. Interstate Bakeries Corp., 55 F. Supp. 234, 236 (W.D. Mo.

1944), aff’d in part and rev’d in part on other grounds, 146 F.2d 325 (8th Cir. 1945).

No. 09-6128 Solis v. Laurelbrook Sanitarium and School Page 17

If a purported employer receives the primary benefit from a working relationship with

a child, it is likely that the child is in competition with adults, whom the employer cannot

employ without complying with the FLSA’s costly and burdensome requirements. If,

however, a child receives the primary benefit of the work performed for a purported

employer, and the child’s presence does more harm to the purported employer’s

operations than good (or no good at all), it is unlikely that the child is competing with

adults for the opportunity to hinder the employer’s operations.

To conclude, we hold that the proper approach for determining whether an

employment relationship exists in the context of a training or learning situation is to

ascertain which party derives the primary benefit from the relationship. Factors such as

whether the relationship displaces paid employees and whether there is educational value

derived from the relationship are relevant considerations that can guide the inquiry.

Additional factors that bear on the inquiry should also be considered insofar as they shed

light on which party primarily benefits from the relationship. The district court applied

such a test. It did not err by doing so.

C

Having determined that the district court applied the proper test for liability, we

consider the second question: whether the district court properly applied the primary

benefit test. After seven days of hearing testimony and receiving documentary evidence,

the district court concluded that Laurelbrook students were the primary beneficiaries of

the work performed: “[a]lthough there is benefit to the school and sanitarium from the

students’ activities, the totality of the circumstances shows that the primary benefit is to

the students, who learn practical skills about work, responsibility, and the dignity of

manual labor in a way consistent with the religious mission of their school.” To guide

its inquiry, the court considered many of the Secretary’s six factors. We review the

district courts factual findings for clear error and its application of the law to those facts

de novo. 3Re.com, 317 F.3d at 537.

We note initially that the district court’s factual findings are not as detailed as in

some other cases. Nevertheless, we find that the findings do not prevent meaningful

No. 09-6128 Solis v. Laurelbrook Sanitarium and School Page 18

review. In Grover Hill Grain Co. v. Baughman-Oster, Inc., 728 F.2d 784 (6th Cir.

1984), we addressed the specificity requirements of a district court’s factual findings:

This Court has enunciated a liberal standard for reviewing the

adequacy of a District Court’s findings. Findings should be

comprehensive and relevant to the issues so as to provide a rational basis

for the trial court’s decision. It is not necessary for the District Court

Judge to prepare elaborate findings on every possible issue raised at trial.

However, there must be findings, in such detail and exactness as the

nature of the case permits, of subsidiary facts on which an ultimate

conclusion can rationally be predicated. The findings should be explicit

so as to give the appellate court a clear understanding of the basis of the

trial court’s decision, and to enable it to determine the grounds on which

the trial court reached its decision.

Findings are to be liberally construed in support of a judgment,

even though the findings are not as explicit or detailed as might be

desired. If, from the facts found, other facts may be inferred which will

support the judgment, such inferences should be deemed to have been

drawn by the District Court.

Indeed, the failure to even make an express finding of a particular

fact does not require reversal if a complete understanding of the issues

may be had without the aid of separate findings.

Id. at 792-93 (internal citations omitted). The district court’s findings satisfy these

requirements as they allow us to understand the basis for its ultimate conclusion.

In applying the primary benefit test, the district court recognized that students’

activities at Laurelbrook contribute to Laurelbrook’s maintenance, thereby benefitting

Laurelbrook’s operations. Laurelbrook receives payment for services it provides to

patients at the Sanitarium; some of these services are performed by students at no cost

to Laurelbrook.3 Hours worked by students in the Sanitarium also contribute to the

Sanitarium’s satisfaction of its licensing requirements. Laurelbrook sells flowers and

produce grown at Laurelbrook with student help. The proceeds from these sales go

3

Laurelbrook contends on appeal that, because of a Medicaid reimbursement cap, student work

at the Sanitarium provides Laurelbrook with no more reimbursements than it would receive without student

assistance. When Laurelbrook removed the student hours from its cost reports, its costs still exceeded the

cap. Including the student hours in its cost reports, therefore, nets Laurelbrook no additional Medicaid

funds. Though the district court did not expressly make a finding on this issue, we can infer from the lack

of rebuttal evidence from the Secretary and the lack of a finding to the contrary that the district court

agreed with Laurelbrook’s contention.

No. 09-6128 Solis v. Laurelbrook Sanitarium and School Page 19

directly to Laurelbrook’s operations. As part of a course on collision repair, students

assist in repairing cars for the public. Beneficiaries of these services pay Laurelbrook

directly and the money is recycled back into school programs. Laurelbrook also earns

revenue from the sale of wood pallets the students help build.

The value of these benefits to Laurelbrook, however, is offset in various ways.

The district court found that Laurelbrook students do not displace compensated

workers,4 and instructors must spend extra time supervising the students at the expense

of performing productive work. Specifically, the court found that Laurelbrook is

sufficiently staffed such that if the students did not perform work at the Sanitarium, the

staff members could continue to provide the same services there without interruption.

And while not specifically mentioned by the district court in its findings, there was

evidence at trial that the same was also true of the work performed by students outside

the Sanitarium. There was also testimony that, were it not for the instructors’

supervisory responsibilities, instructors would be able to complete more productive tasks

in less time. Moreover, as the district court found, Laurelbrook is not in competition

with other institutions for labor, so Laurelbrook does not enjoy an unfair advantage over

other institutions by reason of work performed by its students.

On the other side of the ledger are the tangible and intangible benefits that accrue

to the students. The district court found that Laurelbrook provides it students with

significant tangible benefits. Students are provided with hands-on training comparable

to training provided in public school vocational courses, allowing them to be competitive

in various vocations upon graduation. Students learn to operate tools normally used in

the trades they are learning, while being supervised by instructors. Students engage in

courses of study that have been considered and approved of by the state accrediting

agency. In short, the educational aspect of the instruction at Laurelbrook is sound, in

contrast to the training program at issue in Baptist Hospital, where the supervision was

inadequate, the exposure to various aspects of the trade limited, and the overall value to

4

Most of the adult staff members at Laurelbrook are volunteers who are members of the Seventh-

Day Adventist Church. Laurelbrook pays them with a stipend rather than a set salary. Thus, they are

compensated for their work at Laurelbrook, despite their nominal status as volunteers.

No. 09-6128 Solis v. Laurelbrook Sanitarium and School Page 20

the students nil. None of these educational shortcomings is present here. Indeed, the

Tennessee Department of Education, through EASEA, has determined that

Laurelbrook’s vocational program provides benefits to the students sufficient to warrant

accreditation.

Significant, too, are the intangible benefits students receive at Laurelbrook. As

the district court found, receiving a well-rounded education — one that includes hands-

on, practical training — is a tenet of the Seventh-Day Adventist Church. Laurelbrook

provides students with the opportunity to obtain such an education in an environment

consistent with their beliefs. The district court found that the vocational training portion

of the education teaches students about responsibility and the dignity of manual labor.

Thought not mentioned in the district court’s opinion, there is ample evidentiary support

for these findings. Parents testified to the benefits their children received from the

program, stating that the students learn the importance of working hard and seeing a task

through to completion. Some parents testified that their children have become more

responsible and have taken on leadership roles since participating in Laurelbrook’s

program. Service in the Sanitarium engenders sensitivity and respect for the elderly and

infirm. Laurelbrook alumni testified that the leadership skills and work ethic developed

at Laurelbrook have proved highly valuable in their future endeavors. Employers also

testified that Laurelbrook alumni have a strong work ethic, leadership skills, and other

practical skills that graduates of other vocational programs lack.

The Secretary discounts the value of these intangible benefits, but we agree with

the district court that they are of significant value. Courts that have addressed the value

of such benefits have likewise concluded that they are significant enough to tip the scale

of primary benefit in the students’ favor even where the school receives tangible benefits

from the students’ activities. See, e.g., Blair, 420 F.3d at 829; Woods, 400 F. Supp. 2d

at 1166; Bobilin, 403 F. Supp. at 1108. The overall value of broad educational benefits

should not be discounted simply because they are intangible.

After considering all of the evidence, the district court found that there is benefit

to Laurelbrook’s operations from the students’ activities, but the primary benefit of the

No. 09-6128 Solis v. Laurelbrook Sanitarium and School Page 21

program runs to the students. We find no error in the district court’s application of the

primary benefit test.

III

The district court applied the proper test when it asked which party to the

relationship received the primary benefit of the students’ activities. We find the district

court’s findings of fact amply supported by the evidence adduced at trial, and agree with

its application of the primary benefit test to conclude that the students at Laurelbrook are

not employees for purposes of the FLSA. Accordingly, the judgment of the district court

is AFFIRMED.