## Facts

- Nonprofit business-improvement entities in Midtown Manhattan operated the Pathways to Employment (PTE) program for formerly homeless and jobless individuals.
- Participants performed recurring clerical, administrative, maintenance, food-service, and outreach work used in defendants’ ongoing operations.
- Participants worked scheduled shifts, were required to clock in and out, and performed regular tasks similar to ordinary employment.
- Participants received stipends of about $40–$60 per week despite working substantial hours.
- Plaintiffs alleged defendants used this low-cost labor to secure contracts and underbid competitors paying lawful wages.
- Defendants contended participants were “trainees” receiving job-skills counseling and therefore not covered by minimum-wage laws.

## Issues

1. Whether PTE participants were “employees” under the Fair Labor Standards Act and the New York State Minimum Wage Act.
2. Whether the PTE program was a bona fide training program such that participants were “trainees,” not employees, and thus outside minimum-wage coverage.

## Decision

- The court held plaintiffs were employees of the defendant entities under both the FLSA and New York minimum-wage law.
- The court rejected defendants’ trainee characterization because the program was not structured as a bona fide training program under applicable legal standards.
- The court found defendants obtained a direct economic benefit from plaintiffs’ labor, supporting employee status.
- The court determined payment of sub-minimum stipends violated federal and state wage laws and that plaintiffs were entitled to monetary relief consistent with those statutes (including back wages and potentially liquidated damages and fees).

## Legal Principles

- FLSA employee status turns on the “economic reality” of the relationship, not labels such as “trainee” or “stipend.”
- A training-program exception applies only where the program is structured primarily for the participant’s benefit and any employer benefit is incidental.
- Regular, productive work integral to an organization’s operations—performed on scheduled shifts with timekeeping requirements—supports a finding of employment.
- Nonprofit status and rehabilitative intent do not exempt an organization from minimum-wage obligations when it uses participants to perform work that directly benefits the organization economically.
- Parallel state minimum-wage protections generally apply when the same economic-reality facts establish an employment relationship.

## Conclusion

The court concluded that PTE participants performed ongoing productive work that directly benefited the defendants and therefore were employees entitled to minimum wage under federal and New York law, notwithstanding the program’s social-service goals and “trainee” label.


Archie v. Grand Cent. P'ship, Inc., 997 F. Supp. 504 (S.D.N.Y. 1998)