H&R Block Need Not Pay Tax Preparers For Time Spent in Training, Court Affirms

May 2 -- Tax professionals seeking to be rehired as H&R Block seasonal tax preparers aren't entitled to pay under the Fair Labor Standards Act for time spent completing 24 hours of continuing professional education required for rehire, the U.S. Court of Appeals for the Eighth Circuit ruled May 2 .  

Affirming summary judgment for H&R Block under the FLSA and state laws, the Eighth Circuit said the tax professionals were “trainees” rather than employees while taking the training because none was guaranteed a job with H&R Block and the training primarily benefits the individuals rather than the employer.

“While the CPE [continuing professional education] requirement is no doubt useful to H&R Block in that the training helps educate the tax professionals and keep them current on tax issues, H&R Block does not reap the benefits until after the tax professionals accept the company's offer of employment,” Judge Roger L. Wollman wrote.

“Indeed, H&R Block offers courses on substantive tax topics, and tax professionals enrolled in those courses could apply the training in a job with a different tax preparation service provider,” the court said.

The tax plaintiffs argued H&R Block “receives an immediate economic advantage” from their training as the company charges $20 for access to its training and advertises it has “the best trained and most qualified” tax preparers in the industry.

But the court said the $20 fee is “de minimis,” H&R Block allows tax professionals to satisfy its training requirement though courses offered by other vendors, and the company's advertising does not affect employment status.

Consistent With DOL Handbook

The court rejected the plaintiffs' argument that their training primarily benefits H&R Block because the skills learned are nontransferable. That H&R Block's courses use the company's internal systems and software “does not render the skills learned at the training courses nontransferable,” the court said.

The Labor Department's Wage and Hour Division field operations handbook supports the conclusion the tax professionals during training weren't H&R Block employees, the court said.

DOL identifies six criteria for deciding whether trainees are employees, including the relative benefits to the individual and the employer, whether the trainees displace regular workers and if they are entitled to a job after training.

The tax professionals failed to raise a triable issue on any factor, despite their argument H&R Block never informed them in writing they wouldn't be paid for training time, the court said.

That alleged lack of notice “does not create a material factual dispute in light of the evidence that the company handbooks explained that tax professionals must complete the training to be eligible for rehire, that doing so was not a guarantee of future employment and that H&R Block charged [$20] for access to its CPE courses,” the court said.

Judges Diana E. Murphy and Raymond W. Greunder joined in the opinion.

Steuve & Siegel, Lear & Werts, Klafter & Olsen and Whitfield & Bryson represented the tax professionals. Husch & Blackwell, O'Melveny & Myers and Seyfarth Shaw represented H&R Block.