Tenth Circuit Court of Appeals* recently issued notable opinions on three topics applicable to employers.
1. FLSA Retaliation.
In Acosta v. Foreclosure Connection, Inc., the Tenth Circuit joined several other federal circuits in holding that a retaliation claim under the Fair Labor Standards Act (“FLSA”) may succeed even if the defendant company does not fall within the FLSA’s definition of “employer.” The FLSA’s minimum wage and overtime requirements explicitly state that they apply only to companies engaged in interstate commerce. See 29 U.S.C. 206(a), 207(a). However, the anti-retaliation provision of the FLSA prohibits “any person” from “discharg[ing] or in any other manner discriminat[ing] against any employee because such employee has filed any complaint . . . related to [the FLSA].” 29 U.S.C. § 215(a)(3). Thus, even small employers who may not be engaged in interstate commerce must take care not to retaliate against employees who complain about minimum wage or overtime issues.
In addition, the Tenth Circuit approvingly cited the Seventh Circuit’s holding that the FLSA’s anti-retaliation protections apply even if an employee’s wage and hour complaint turns out not to be meritorious. The rationale is that an employee who voices a complaint “concern[ing] the minimum wage or maximum hour laws” should enjoy whistleblower protections even if the employee has a misunderstanding as to his or her rights. So even if your attorney tells you that an employee’s complaint has no merit, you need to refrain from taking any action against the employee that might be seen as retaliatory.
2. Adverse Action in Title VII Retaliation.
In Payan v. UPS, the Tenth Circuit held that an employee’s receipt of a performance improvement plan (“PIP”) and an intracompany transfer did not constitute “adverse employment actions” for purposes of a Title VII retaliation claim. The employee had complained to human resources that his supervisor was discriminating against him on the basis of his race. After making these complaints, the employee received a PIP and was transferred to a new position. These actions by the company formed the basis for the employee’s subsequent retaliation claim.
The general test for whether an employment action is “adverse” is whether it would “dissuade a reasonable worker” from making a discrimination complaint. Although the court left open the possibility that some PIPs and some transfers could constitute adverse employment actions, it held that this PIP and this transfer did not constitute adverse employment actions. The requirements of the PIP “included attending one meeting every month to check his progression, using a daily planner to improve his organization, and coordinating developmental meetings with his subordinates.” “None of these tasks were difficult or especially time-consuming, and it was all aimed at improving Mr. Payan’s work habits and productivity.” Similarly, the transfer did not constitute an adverse employment action because employee did not identify any hardship he suffered as a result. The new position involved a pay increase, was at the same supervisory level, and did not require the employee to report to a different physical location.
This opinion provides a template for employers wishing to address performance issues of employees who have engaged in protected activity or wishing to transfer a complaining employee out of an unsatisfactory work environment. However, it is still recommended to proceed carefully in these areas and to consult with legal counsel to ensure that your PIP or transfer are not seen as capable of dissuading a reasonable employee from complaining of harassment or discrimination.
3. Unpaid Trainees.
In Nesbitt v. FCNH, Inc., the Tenth Circuit addressed the line between employees, who are entitled to minimum wage and overtime, and unpaid trainees. The case was brought by students of a for-profit vocational school who performed massages for paying clients as part of their curriculum. Trainers were on site whenever the students performed the massages, although there was a factual dispute regarding the extent of the supervision and feedback provided.
The Tenth Circuit analyzed whether the students were “employees” under the FLSA using a previously established six-part balancing test: “(1) whether the training received is similar to that which would be given in a vocational school; (2) whether the training is for the benefit of the trainee or the employer; (3) whether the trainees displace regular employees, or rather work under close observation or supervision; (4) whether the employer that provides the training derives an immediate advantage from the activities of the trainees; (5) whether the trainees are necessarily entitled to a job at the completion of their training period; and (6) whether the employer and trainees understand that the trainees are not entitled to wages for the time they spend in training.”
The court’s opinion focused on factor two (whether the training was for the benefit of the students or the school) and factor three (whether there was “close observation or supervision”). Regarding factor two, the court held that because “the hours students spent performing massages as part of their  curriculum allowed them to advance toward their minimum licensing requirements, [this work] provided them an obvious benefit.” The court did not appear interested in assessing the profit, if any, that the school derived from the massage treatments for purposes of comparing the benefit received by the students with the benefit received by the school. Regarding supervision, the court held that the “‘close supervision’ factor [was simply] meant to distinguish between regular employees and trainees,” and that this factor was satisfied because of the “presence of supervisory licensed massage therapists and teaching assistants.” Because of the supervisors’ presence, “[a]t no time did the students function as regular employees; they were students learning a trade on vocational school premises.”
This decision adds clarity to the legal status of unpaid vocational training programs and also has application to unpaid internship programs. Under this holding, an unpaid trainee or intern should ideally receive educational credits that allow them to advance toward degree or licensure requirements. In addition, an unpaid trainee or intern should always work under the supervision of a paid employee who provides feedback on their work. The other four factors above are also relevant, including, perhaps most importantly, that the trainee or intern have been informed in writing and acknowledged in writing that they are not be entitled to wages. Companies are encouraged to consult with legal counsel in designing any unpaid training or internship programs.
If you have questions about these Tenth Circuit opinions or any other employment law matter, please contact Shaunda L. McNeill at firstname.lastname@example.org or any of the attorneys in Clyde Snow’s Labor & Employment Group at Clyde Snow at 801.322.2516.
* The Tenth Circuit is the federal appeals court with jurisdiction over Utah, Colorado, Oklahoma, Wyoming, Kansas, and New Mexico.