What Employers Need to Keep in Mind During Working Interviews

Hiring employees is expensive in both time and money. Employers want to be confident that when they offer employment to a candidate the person has the requisite skills and will be a good fit for their organization. One of the newer trends in hiring is to require a candidate to engage in a “working interview” where the candidate actually performs the job for some period of time before the offer is extended. Do you have to pay the candidate for that time? The definition of “employ” under the Fair Labor Standards Act is “to suffer or permit to” work. The federal Department of Labor and most state DOL’s (as well as the Internal Revenue Service, more on that below) say working interviews are work for which a candidate must be paid.  But, the answer is not that clear. Although there is a lack of case law on this issue, two recent cases do shed some light.

In Acosta v. Smiley Dental Associates, Inc. et al,  [November 31, 2018] the District Court for the Middle District of Tennessee entered a negotiated injunction with a dental practice which required it to pay $50,000 in back wages and liquidated damages to ten employees, and prohibited the practice from engaging in future violations of the Fair Labor Standards Act.  The DOL’s allegations included a claim that the practice required dental hygienist candidates to perform services on actual patients whom, presumably, the practice charged for the work done. The candidates were not paid for this “working interview” time. It is hard to read this case as standing for the proposition that employers always must pay candidates for working interviews. The DOL alleged several other FLSA violations and the injunction entered does not specify for which violations the back pay was awarded. An exhibit to the injunction shows that the ten employees awarded back pay all worked for the dental practice for far longer than what would constitute a working interview, and there is nothing in the injunction itself that acts as a finding that the working interview was included in the time for which damages were awarded.

In 2017, the Ninth Circuit Court of Appeals, in a non-precedential decision affirmed a District Court’s grant of summary judgment in favor of an employer who did not pay candidates for a three-day working interview. [See:  Nance v. May Trucking Company, No.14-3560, March 29, 2017] There, candidates for a trucking company spent a day undergoing tests related to Department of Transportation regulations and a separated day demonstrating their ability to operate the Employer’s equipment. The court held that the candidates had no expectation of being paid. Without actually saying it, this court found that the candidates did not perform “work.”  Interestingly, the court applied an economic realities test in reaching that conclusion.

How can an Employer resolve these two cases and stay on the right side of the FLSA?  As I read the two cases, the difference comes down to the application of the concept of “work.”  In the trucking case, the Employer obtained no economic advantage by the testing, whereas, I presume, the dental practice billed its patients for the work done by the candidates. It seems to come down to whether the working interview is merely a “skills test” or whether the Employer obtains something of value from the candidate’s efforts.

If an Employer does not want to pay job candidates in order to determine their skill level, a working interview should be limited to a skills test. For example, a dental practice considering hiring a hygienist or dentist can set up a faux examination with the candidate working on other employees rather than actual patients. The Employer should obtain no economic advantage from the test. If there is any possibility for damage or injury in performing the skills test, Employers should be sure that their liability insurance will cover the test.

A word about the IRS: if a working interview is deemed to be compensable under the FLSA, employers would have the same withholding obligations as with a regular employer.