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The Experience Really Is Invaluable: Working an Unpaid Externship & FLSA Claims For Minimum Wage


Kaplan v. Code Blue Billing & Coding, Inc. - Eleventh Circuit Court of Appeals


Facts:  Plaintiffs were enrolled as students in MedVance Institute's Medical Billing and Coding Specialist program.  To graduate, MedVance required all students complete an externship program.  Plaintiffs completed their externship at Code Blue Billing & Coding, Inc., Magnetic Medical Management, Inc., and East Florida Eye Institute, P.A.  Plaintiffs did not expect nor receive payment for the work they performed.

After completing their externships, Plaintiffs filed a complaint for minimum wage under the Fair Labor Standards Act (FLSA) for work performed during their externship.  Plaintiffs argued they received very little educational benefit from their externships and instead had conferred economic benefit on Defendants.  As a result, Plaintiffs alleged they were "employees" under the FLSA and were entitled to minimum wage.

The trial court granted Defendants' motion for summary judgment holding the Plaintiffs were not "employees" under the FLSA.  The Eleventh Circuit Court of Appeals affirmed.

Holding:  In determining whether an employer-employee relationship exists under the FLSA, the "economic realities" of the relationship, including whether a person's work confers an economic benefit on the entity, must be considered.  When a person works for his own advantage or personal purpose, however, he is not an "employee" under the FLSA.  The Court reasoned that Plaintiffs participated in the externship for their own benefit as Plaintiffs engaged in hands on work to satisfy degree requirements, and upon completion of the externship, they were eligible to earn their degree.  Plaintiffs argued that because of their work, Defendants benefited economically.  However, the Court noted that while Plaintiffs were engaged in their externship, Defendants' staff spent time away from their regular duties to supervise and review Plaintiffs' work.  The Court also held that Plaintiffs externship caused Defendants' businesses to run less efficiently.  Consequently, Defendants received little if any economic benefit from Plaintiffs' work.  As a result, under the "economic realities" test, Plaintiffs were not employees within the meaning of the FLSA and therefore not entitled to minimum wage for their work.

The Court also relied upon guidance from the Department of Labor's Wage and Hour Administrator which set forth six factors to be used to determine whether a trainee qualifies as an employee under the FLSA.  McLaughlin v. Ensley, 877 F.2d 1207 (4th Cir. 1998).  Based upon these six factors, the Court held that Plaintiffs again failed to establish that they were employees under the FLSA and therefore the lower court's granting of summary judgment for Defendants was proper.

Judgment: The Eleventh Circuit Court of Appeals affirmed the trial court's grant of summary judgment in favor of Defendants.

Majority Opinion Judge:  Per Curiam

Date:  January 22, 2013

Opinion:  http://www.ca11.uscourts.gov/unpub/ops/201212011.pdf

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