Child Labor laws and You at Global Risk Management Conference


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Child Labor Laws and You: How schools and other nonprofits using volunteers, students and interns may be at risk regarding employment and labor laws. Includes yhe purposes of child labor laws; from sweatshop to college internship, why do you need to be aware of child labor laws?; what sets of laws, regulations and rules apply?; issues to consider and tests to apply; consequences your organization may face: liability and penalties; and tips for schools and employers. Presented at the Global Risk Management Conference by Lauri Cleary and Stan Reed, attorneys at Lerch, Early & Brewer in Bethesda, Maryland.

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Child Labor laws and You at Global Risk Management Conference

  1. 1. Child Labor Laws and You Global Risk Management Conference Plenary Session Lauri E. Cleary Stanley J. Reed Lerch, Early & Brewer, Chtd.
  2. 2. Speakers <ul><li>Lauri Cleary is an attorney who represents individual and corporate clients, including religious and other nonprofit organizations, educational institutions and insurance underwriters in all types of commercial, tort and employment litigation matters in addition to providing employment and litigation avoidance advice. </li></ul><ul><li>Stan Reed is an attorney who represents individuals and corporations, including nonprofits and health care providers, in complex civil and employment litigation, as well as in white collar and other criminal defense matters and professional responsibility matters. </li></ul>(301) 657-0177 [email_address] (301) 657-0176 [email_address] This content is for your information only and is not intended to constitute legal advice. Please consult your attorney before acting on any information contained here.
  3. 3. Overview <ul><li>Purposes of Child Labor Laws </li></ul><ul><ul><li>From sweatshop to college internship, why do you need to be aware of child labor laws? </li></ul></ul><ul><li>General Legal Framework—all employment laws </li></ul><ul><ul><li>How many sets of laws, regulations and rules apply? </li></ul></ul><ul><li>Issues to Consider and Tests to Apply </li></ul><ul><li>Consequences Your Organization May Face: Liability and Penalties </li></ul><ul><li>Tips for Schools and Employers </li></ul>
  4. 4. Why does every employer need to be aware of child labor laws? <ul><li>If your unpaid intern is really an employee, you must observe: </li></ul><ul><li>Wage and hour laws </li></ul><ul><li>Wage payment laws </li></ul><ul><li>Tax laws </li></ul><ul><li>Immigration laws </li></ul><ul><li>Benefit plan and insurance requirements for excluding certain persons performing work on your premises </li></ul><ul><li>More importantly, you may face a child labor audit, fines, penalties, lawsuits (treble damages), etc., etc., etc. </li></ul>
  5. 5. Our students are not “employees;” why must we be aware of these laws? <ul><li>In 1992, according to the National Association of Colleges & Employers (NACE), only 9% of college graduates had completed internships at some point. </li></ul><ul><li>By 2008, 83% of college graduates polled had completed an unpaid internship at some point. </li></ul><ul><li>In 2011, a new poll showed that more than half of college internships were paid . </li></ul><ul><li>The lines between education and employment are blurring, and ALL persons present in the workplace must know of and comply with certain laws and policies to manage risks of liability. </li></ul>
  6. 6. Purposes of Child Labor Laws <ul><li>Laws and regulations designed to protect unpaid students/paid minor employees from exploitation by requiring working conditions that: </li></ul><ul><ul><ul><li>are safe </li></ul></ul></ul><ul><ul><ul><li>are positive </li></ul></ul></ul><ul><ul><ul><li>complement the educational process </li></ul></ul></ul><ul><ul><li>BUT ALSO these laws tend to protect members of the work force from displacement by unpaid workers, including interns, “volunteers,” etc. </li></ul></ul>
  7. 7. General Legal Framework <ul><li>Laws and regulations are enacted at the: </li></ul><ul><ul><li>Federal Levels </li></ul></ul><ul><ul><ul><li>U.S.: Fair Labor Standards Act , 29 U.S.C. § 201 et seq. (the FLSA)and regulations promulgated thereunder </li></ul></ul></ul><ul><ul><ul><li>Canada: Canada Labour Code regulates about 10% of workers </li></ul></ul></ul><ul><ul><li>State/Provincial orTerritorial/Local Levels </li></ul></ul><ul><ul><ul><li>E.g., the District of Columbia’s Minimum Wage is $8.25 while DOL’s Minimum Wage under FLSA is $7.25; the State of Maryland and Commonwealth of Virginia follow federal wage </li></ul></ul></ul><ul><ul><ul><li>Canada: Ontario’s Employment Standards Act </li></ul></ul></ul><ul><li>Rule of thumb: follow the highest/most onerous or restrictive standard applicable </li></ul>
  8. 8. Legal Framework, cont’d <ul><li>NO RELIGIOUS/NONPROFIT EXEMPTION(S) </li></ul><ul><ul><li>No special rules, BUT nonprofits most frequently are the employers who operate FLSA-covered enumerated “enterprises,” which include hospitals, residential care institutions, preschools, elementary and secondary schools, and institutions of higher education. </li></ul></ul><ul><ul><li>FLSA also covers employers engaged in “commerce” OR employers whose workers engage in interstate “commerce” or interstate communication” (e.g. telephone, internet, etc.) </li></ul></ul><ul><li>Upshot: Assume you are a covered employer! Then consider whether the worker is an employee by looking for an exemption…. </li></ul>
  9. 9. FLSA Exemptions <ul><li>IT’S NOT REALLY ABOUT YOU; IT’S ABOUT WORK RELATIONSHIPS </li></ul><ul><ul><li>You and other potential “employers” are not the real focus; rather, to determine whether the FLSA and other employment laws apply, the key inquiry is whether the employee is a “covered” individual . </li></ul></ul><ul><ul><li>Focus usually will be on the worker and the work relationship. </li></ul></ul>
  10. 10. Issues to Consider <ul><li>Is the young person an employee? If so </li></ul><ul><li>Just how young is this employee? </li></ul><ul><li>What time of day/week/year may (s)he work? </li></ul><ul><li>What types of work tasks or occupations may (s)he perform? </li></ul><ul><li>Consequences of being wrong—worth it? </li></ul>
  11. 11. Is the Young Person an Employee? <ul><li>Teenagers are often classified as: </li></ul><ul><ul><li>Volunteers </li></ul></ul><ul><ul><li>Interns </li></ul></ul><ul><ul><li>Apprentices </li></ul></ul><ul><ul><li>Trainees </li></ul></ul><ul><li>Schools commonly offer 2 types of program: </li></ul><ul><ul><li>Work Experience Program </li></ul></ul><ul><ul><li>Work Study Program </li></ul></ul><ul><ul><li>We’ll look at each, but first . . . . </li></ul></ul>
  12. 12. FLSA’s “Unhelpful” Definitions <ul><li>An “employee” under the FLSA is any person who is employed by an employer (29 U.S.C. §203(e)(1)). </li></ul><ul><li>To “employ” someone under the FLSA is to “suffer or permit to work ” (29 U.S.C. §203(g)). (So broad all students would be school’s “employees.”) </li></ul><ul><li>Courts clarify : “ Work ” is time “controlled or required by the employer and pursued necessarily and primarily for the benefit of the employer and his business .” (Chau v. Tradesmen Int’l, 310 F.3d 904,907 (6 th Cir. 2002, quoting Tenn.C.,I.&R.Co. v. Muscoda, 321 U.S. 590, 598 (1944—yes, 1944!). </li></ul>
  13. 13. Non-Employees <ul><li>Bona fide volunteers, trainees and interns* generally do not qualify as FLSA-covered “employees” </li></ul><ul><ul><li>They are not entitled to the FLSA’s protections , but how to identify them? </li></ul></ul><ul><ul><ul><li>There are 2 key questions to ask: </li></ul></ul></ul><ul><ul><ul><ul><li>Who primarily benefits from the work? </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Are they displacing paid employees? </li></ul></ul></ul></ul><ul><ul><ul><ul><li>* (and a few others, such as employees of elected officials) </li></ul></ul></ul></ul>
  14. 14. Trainee or Employee? <ul><li>There is some U.S. Supreme Court guidance, but no settled federal test under the FLSA </li></ul><ul><li>1947 Portland Terminal* case~ railroad brakemen </li></ul><ul><ul><li>Asked to determine whether unpaid trainees were really exploited employees of railroad, U.S. Supreme Court found it significant that the brakemen trainees </li></ul></ul><ul><ul><ul><li>worked under meaningful, skilled supervision </li></ul></ul></ul><ul><ul><ul><li>did not displace paid workers </li></ul></ul></ul><ul><ul><ul><li>did not perform work that was of primary benefit to the railroad employer </li></ul></ul></ul><ul><ul><ul><li>Walling v. Portland Terminal Co ., 330 U.S.148, 67 S.Ct. 639, 91 L.Ed. 809 (1947) </li></ul></ul></ul>
  15. 15. Vocational Students as Trainees <ul><li>Solis v. Laurelbrook Sanitarium and School, 6 th Cir. April, 2011 (SDA case!) </li></ul><ul><ul><li>No settled S.Ct./other federal test </li></ul></ul><ul><ul><li>“ Economic realities” govern </li></ul></ul><ul><ul><li>Court adopts Primary Benefit Test: </li></ul></ul><ul><ul><ul><li>Who receives primary benefit of work? </li></ul></ul></ul><ul><ul><ul><li>Consider educational value, displacement </li></ul></ul></ul>
  16. 16. The 6 th Circuit’s Decision in Solis v. LaurelbrookSanatarium <ul><li>Rejected Laurelbrook’s categorical exemption for vocational school students, thus rejected “labels.” The religious “trump card” was not necessary. </li></ul><ul><li>Rejected the DOL’s “rigid” 6-factor test set out in WHD’s Field Operations Handbook </li></ul><ul><ul><li>Split among the federal circuits courts of appeals on use of this test: some defer to it, some reject it (4 th , 6 th Cir.), while others balance (5 th , 10 th Cir.) </li></ul></ul><ul><ul><li>Courts agree on the basic relevant factors, but often reject rigid test, favoring “totality of circumstances” approach consistent with Supreme Court precedent </li></ul></ul>
  17. 17. Interns <ul><li>Work for their own benefit to learn a profession or vocation with adequate (skilled) supervision and instruction </li></ul><ul><li>Employer does not derive the primary benefits of the work performed by these workers </li></ul><ul><li>Do not displace paid employees </li></ul>
  18. 18. Volunteers <ul><li>May only work for non-profit s </li></ul><ul><li>Perform with no expectation of compensation </li></ul><ul><li>Do not displace or fill positions of regular employees and usually do not work full time </li></ul><ul><li>Also consider: </li></ul><ul><ul><li>Services are usually subject to less control, and are performed to the volunteer’s satisfaction or for the volunteer’s benefit </li></ul></ul><ul><ul><li>May perform very repetitive tasks (like stuffing envelopes) </li></ul></ul>
  19. 19. Volunteers, cont’d <ul><ul><li>Sometimes there are analogies, but no clear rules: </li></ul></ul><ul><ul><li>For example, employees of PUBLIC agencies may volunteer services that are not similar to those they are employed to perform (29 U.S.C. §203(e)(4)(A); 29 C.F.R. §553.103(a); see the DOL’s Wage & Hour Division’s Field Operations Handbook ) </li></ul></ul><ul><ul><li>The DOL’s rules do not include any similar provisions for private and nonprofit employers, but itsWage and Hour Division applies the same policy to nonprofit, religious or charitable organizations, as spelled out in Handbook (FOH §10b03(d)). </li></ul></ul>
  20. 20. DOL “Work Experience Program” (Internships, Externships, etc.) <ul><li>Minors 14 to 16 years of age </li></ul><ul><li>Enrollment in and work pursuant to a school-supervised and school- administered work-experience and career exploration program that meets the standards of state educational agency </li></ul><ul><li>Student workers receive school credit </li></ul><ul><li>Students may work in any occupation except for mining, manufacturing and various hazardous occupations </li></ul><ul><li>The student workers cannot displace employees </li></ul><ul><li>Students may not work more than 23 hours in any single week during the school year </li></ul>
  21. 21. DOL Work Study Program <ul><li>The program must meet the educational standards of the State educational agency </li></ul><ul><li>Students must be enrolled in a college preparatory program </li></ul><ul><li>There must be a teacher-coordinator at the school </li></ul><ul><li>There must be a written agreement signed by the teacher-coordinator, the employer, and the student </li></ul><ul><li>Students may work during school hours </li></ul><ul><li>Students may not work more than 18 hours in any single week when school is in session. </li></ul>
  22. 22. DOL: 2-year Worker Age Groups <ul><li>Under 14 years </li></ul><ul><ul><li>May not work (but see several exceptions below) </li></ul></ul><ul><li>14 & 15 years old </li></ul><ul><ul><li>Hours restrictions </li></ul></ul><ul><ul><li>Task/occupation restrictions </li></ul></ul><ul><li>16 & 17 years old </li></ul><ul><ul><li>Are not subject to a restriction on hours </li></ul></ul><ul><ul><li>May perform any occupation not declared hazardous by the U.S. Secretary of Labor </li></ul></ul>
  23. 23. DOL: Minors Age 14 & 15 <ul><li>May work at certain times: </li></ul><ul><ul><li>Between 7am and 7pm from Labor Day to June 1 </li></ul></ul><ul><ul><li>Between 7am and 8pm from June 1 to Labor Day </li></ul></ul><ul><ul><li>Outside school hours </li></ul></ul><ul><li>May not work in certain occupations: </li></ul><ul><ul><li>Manufacturing and mining </li></ul></ul><ul><ul><li>Maintenance or repair of a building or equipment </li></ul></ul><ul><ul><li>Performing any part of the baking process (cf. new rule!) </li></ul></ul><ul><ul><li>Work as a lifeguard at a beach or other natural environment </li></ul></ul><ul><ul><li>“ Hazardous” occupations </li></ul></ul>
  24. 24. DOL: Minors Age 14 & 15, cont’d <ul><li>Examples of jobs 14 & 15-year-olds may work in: </li></ul><ul><ul><li>Cashiering </li></ul></ul><ul><ul><li>Selling </li></ul></ul><ul><ul><li>Price marking </li></ul></ul><ul><ul><li>Assembling orders </li></ul></ul><ul><ul><li>Packing </li></ul></ul><ul><ul><li>Office and clerical work </li></ul></ul><ul><ul><li>Bagging groceries </li></ul></ul><ul><ul><li>Hand washing cars </li></ul></ul><ul><ul><li>Work of an intellectual or artistically creative nature </li></ul></ul><ul><ul><li>Cook over gas or electric grills (so long as there is no open flame) </li></ul></ul>
  25. 25. Minors Age 16 & 17 <ul><li>Under federal FLSA- no hours restrictions </li></ul><ul><li>Under MD law (for example) - minors age 16 & 17 </li></ul><ul><ul><li>May spend no more than 12 hours in a combination of school hours and work hours each day </li></ul></ul><ul><ul><li>Must be allowed at least 8 consecutive hours of non-work, non-school time in each 24-hour period </li></ul></ul><ul><li>May not work in “hazardous” occupations—but what are those? </li></ul>
  26. 26. “ Hazardous” Occupations <ul><li>Regularly driving or delivering items by vehicle </li></ul><ul><li>Woodworking </li></ul><ul><li>Maintenance & repair </li></ul><ul><li>Electrical maintenance work </li></ul><ul><li>Baking (!) </li></ul><ul><li>Avoid all of these even for minor volunteers at a “work bee” or other volunteer event involving kids </li></ul>
  27. 27. DOL Exceptions <ul><li>Minors of any age may be employed to do these: </li></ul><ul><ul><li>Casually babysit </li></ul></ul><ul><ul><li>Deliver newspapers to consumers </li></ul></ul><ul><ul><li>Model </li></ul></ul><ul><ul><li>Act in movies, TV, radio, theater, etc. </li></ul></ul><ul><ul><li>Work in a store other business owned by their parent or one fulfilling parental role (with limitations) </li></ul></ul><ul><ul><li>THERE IS NO GENERAL RELIGIOUS WORK EXCEPTION (Consider child prodigy preachers) </li></ul></ul>
  28. 28. What about “seasonal” or “recreational employers?” <ul><li>Employees of certain “seasonal and recreational” establishments are exempt from the minimum wage and overtime pay protections of FLSA </li></ul><ul><ul><li>A 2-part test is applied to these establishments, which, to be exempt, must demonstrate: </li></ul></ul><ul><ul><ul><li>(1) that they do not operate for more than 7 months in any calendar year; and </li></ul></ul></ul><ul><ul><li>(2) that their average income for any 6 months of the previous year did not exceed one third of the average receipts for the other 6 months </li></ul></ul>
  29. 29. Can we pay a “youth minimum wage?” <ul><li>The Youth Minimum Wage is a federal exception (FLSA/DOL) to Minimum Wage Law for workers </li></ul><ul><ul><li>under 20 years old (even if they turn 20 during relevant period) </li></ul></ul><ul><ul><li>during the first 90 days of work </li></ul></ul><ul><ul><li>That allows employers (currently) may pay $4.25/hour instead of $7.25/hour </li></ul></ul><ul><ul><li>UNLESS trumped by State law or regulation that is more generous </li></ul></ul>
  30. 30. What about “stipends”? <ul><li>DOL tolerates payment stipend to defray expenses, but if it is deemed payment for services, then consider: </li></ul><ul><ul><ul><li>Must employer withhold taxes? Issue a Form 1099 ($600 min.) </li></ul></ul></ul><ul><ul><ul><li>Is the Stipend income to the worker? </li></ul></ul></ul><ul><ul><ul><li>Does the amount meet minimum wage law? </li></ul></ul></ul><ul><ul><li>Expense reimbursements are not taxed, but what about reimbursement of everyday expenses? (e.g./cost of commuting) </li></ul></ul><ul><li>Fellowship/scholarship stipends and tuition reductions are not taxed if they meet federal criteria. </li></ul><ul><ul><li>(Go to and search “fellowship” or “scholarship”) </li></ul></ul>
  31. 31. Enforcement Actions <ul><li>Being the subject of a child labor investigation may be worse than the penalty for any violation(s) </li></ul><ul><li>IRS investigations of employee withholdings </li></ul><ul><li>Tidal wave of class actions and other wage and hour lawsuits (search online “overtime claims”) </li></ul><ul><ul><li>Court approval and reporting of FLSA settlements </li></ul></ul><ul><ul><li>Florida, Florida, Florida! </li></ul></ul><ul><li>Actual & increasing penalties . . . . </li></ul>
  32. 32. Federal Penalties: Jan. 2010 *Hot Goods are those manufactured by children and shipped in interstate commerce Violation Penalty Employing a minor under 12 $8,000 Employing a minor age 12 or 13 $6,000 Minor under age 14 works outside of prescribed hours $775 Minor under age 14 works in a prohibited occupation $900 Minor age 14 or 15 works outside of prescribed hours $575 Minor age 14 or 15 works in a prohibited occupation $850 Minor under age 16 works in Hazardous Occupation $1950 Failure to have birthdate on file $350 Shipment of Hot Goods* under FLSA § 12(a) $775 or $1550
  33. 33. FLSA & State Law Damages <ul><li>Compensatory Damages </li></ul><ul><li>Liquidated Damages </li></ul><ul><ul><li>Doubled under FLSA if good faith not shown </li></ul></ul><ul><ul><li>Trebled under some States’ laws (e.g., Maryland) </li></ul></ul><ul><ul><ul><li>How establish good faith defense? Make a good-faith effort to ascertain what the law requires (¶953 of the DOL-WHD’s Handbook) and “show your work.” Also, consult counsel ! Yes, it’s true!—the courts accept this as persuasive evidence and the DOL recommends it. (Trust us—we’re lawyers) </li></ul></ul></ul>
  34. 34. Program Tips for Employers <ul><li>Try to determine whether the young person may be considered an “employee” then document in a way that reflects your “good faith” conclusions drawn </li></ul><ul><ul><li>Consider consequences of error—are they worth it? </li></ul></ul><ul><ul><li>Consult all available resources (especially free ones!) </li></ul></ul><ul><ul><ul><li>(~a brief self-serving commercial break~) </li></ul></ul></ul><ul><ul><li>Create programs demonstrating non-employee status </li></ul></ul><ul><ul><ul><li>Consider guidelines and other special materials for the program participants </li></ul></ul></ul><ul><ul><ul><li>Remember to include matters that ALL must observe (e.g., non-discrimination and harassment policies) </li></ul></ul></ul>
  35. 35. Tips for Employers, cont’d <ul><li>Research and comply with child labor laws that apply to your operation (check federal, state, local) </li></ul><ul><ul><li>Document and periodically update your compliance records; for employees under age 19, keep these on file: </li></ul></ul><ul><ul><li>Record of dates of birth (birth certificate) </li></ul></ul><ul><ul><li>Daily starting and quitting times </li></ul></ul><ul><ul><li>Daily and weekly hours of work </li></ul></ul><ul><ul><li>Occupations/tasks performed </li></ul></ul><ul><ul><li>Understand labor enforcement agencies view failure to pay min. wage not only as a legal violation but as a moral failing </li></ul></ul>
  36. 36. A Word About Liability <ul><li>Going “off the reservation” (campus, office) </li></ul><ul><ul><li>Study abroad programs </li></ul></ul><ul><ul><li>Informal assignments off-site may venture into other jurisdictions </li></ul></ul><ul><ul><li>Internships/other placements in locations off campus, perhaps in another jurisdiction </li></ul></ul>
  37. 37. For more information <ul><li>U.S. Department of Labor’s (DOL’s) </li></ul><ul><li>Wage & Hour Division’s (WHD’s) </li></ul><ul><li>“ Youth Rules” </li></ul><ul><li> </li></ul><ul><li>also see helpful state links </li></ul>
  38. 40. Or just contact us (Lauri or Stan) <ul><li>Lauri Cleary is an attorney who represents individual and corporate clients, including religious and other nonprofit organizations, educational institutions and insurance underwriters in all types of commercial, tort and employment litigation matters in addition to providing employment and litigation avoidance advice. </li></ul><ul><li>Stan Reed is an attorney who represents individuals and corporations, including nonprofits and health care providers, in complex civil and employment litigation, as well as in white collar and other criminal defense matters and professional responsibility matters. </li></ul>Stanley J. Reed (301) 657-0177 [email_address] Lauri E. Cleary (301) 657-0176 [email_address] Lerch, Early & Brewer 3 Bethesda Metro Center, Suite 460 Bethesda, Maryland 20814