Solis v. Sanitarium

• Decision Date: 06 July 2011
• Docket Number: No. 09–6128.,09–6128.
• Citation: 17 Wage & Hour Cas.2d (BNA) 929,642 F.3d 518,268 Ed. Law Rep. 683
• Parties: Hilda SOLIS, Secretary of Labor, U.S. Department of Labor, Plaintiff–Appellant,v.LAURELBROOK SANITARIUM AND SCHOOL, INC., Defendant–Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

642 F.3d 518

161 Lab.Cas. P 35,898

268 Ed. Law Rep. 683

17 Wage & Hour Cas.2d (BNA) 929

Hilda SOLIS, Secretary of Labor, U.S. Department of Labor, Plaintiff–Appellant,

v.LAURELBROOK SANITARIUM AND SCHOOL, INC., Defendant–Appellee.

No. 09–6128.

United States Court of Appeals, Sixth Circuit.

Argued: March 11, 2011.Decided and Filed: April 28, 2011.Rehearing and Rehearing En Banc Denied July 6, 2011.

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

OPINION

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 nonprofit 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 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 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 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 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...