Sara Jasper, JD
Staff Attorney
The Therapist
July/August 2013
Reviewed October, 2017 by Alain Montgomery, JD (CAMFT Paralegal)
(Note: Part 2: Are Nonprofit Agencies "Commercial Enterprises?" also appears in this issue of The Therapist)

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Over the years there has been much discussion and debate amongst members of the psychotherapeutic community about the legality of having trainees and associates pay for their supervision. Given the continued importance of this issue to our membership, CAMFT, with input from outside employment counsel, recently re- examined relevant statutes and legal opinions. It is CAMFT’s opinion that generally speaking, most employers should not charge for supervision under the California labor laws. This article provides a summary of the law, reviews the exceptions to this principal, and offers general suggestions on how to structure relationships with trainees and associates in a manner that complies with the applicable laws.

The Laws That Determine Whether Employers May Charge for Supervision
The majority of statutes, case law, and legal opinions have generally been interpreted as prohibiting employers from charging trainees and associates from paying for supervision.¹ The main arguments against allowing this practice are as follows:

• Employers cannot ask or require their employees to relinquish or pay back a portion of their wages to their employers.² In other words, it is unlawful for employers of trainees and associates to deduct training fees for supervision from employees’ paychecks.³
• It is also unlawful under state law for employers to compel or coerce employees into purchasing anything of value from the business.⁴ This means employers should not require trainees and associates to purchase supervision from the employer.
• California law also prohibits employers from charging employees for anything that is of benefit to the employer or anything that could be considered an obligation of the employer or part of the employer’s cost of doing business.⁵ Some employers may perceive supervision as a service that merely benefits the trainees and associates who are required to receive supervision as a condition of licensure. However, it can also be argued that employers of trainees and associates also benefit from the supervisory relationship because supervision of those employees ensures that services provided by the employees meet industry standards. The work supervisors do with trainees and associates reduces the likelihood of an employer’s liability if a lawsuit is filed on behalf of clients who allege some type of harm as a result of the actions of the employer’s trainees or associates.

Note: These arguments hold true regardless of whether the supervisor is employed or contracted by the agency. Based on the above general principals of law, we recommend that employers do not charge their employee trainees or associates for supervision or trainings.

Charging Volunteers for Supervision
CAMFT has often been asked whether volunteer trainees and associates may pay for supervision. Well, the answer is: it depends. First, it must be determined whether the trainee and/or associate has been classified correctly. Meaning, have they been classified as a “volunteer” when in fact, they should be an “employee”? It is our experience that some entities mis-classify their associates and trainees as volunteers, when in fact they should be employees. To determine if the associate/trainee is classified correctly, the employer should review the six-criteria test put forth by the Division of Labor Standards Enforcement:⁶

1. The training, even though it includes actual operation of the employer’s facilities, is similar to that which would be given in a vocational school.
2. The training is for the benefit of the trainees and/or associates.
3. The trainees and/or associates do not displace regular employees, but instead, work under close observation.
4. The employer derives no immediate advantage from the activities of the trainees and/or associates, and, on occasion, the employer’s operations actually may be impeded. (For example, does agency run a commercial enterprise that charges clients or a 501(c)(3) which provides pro bono clinical services? For a more in-depth analysis of this legal principal, please see “Part II: Are Nonprofit Agencies ‘Commercial Enterprises’?” also included within this issue of The Therapist.)
5. The trainees and/or associates are not entitled to a job at the conclusion of the training period.
6. The employer and the trainees and/or associates understand that the latter are not entitled to wages for the time spent in training.

If the entity answers “yes” to all the six criteria, then it is possible that the entity could classify their associates and/or trainees as true volunteers and as such, could charge for supervision and trainings. If the entity answers “no” to any of the previous six criteria, then the trainees or associates may need to be classified as employees and not volunteers, and as such, not charged for supervision or trainings. Additional legal consultation is advised by a wage and hour attorney given the complexity of this issue.

Training Facilities
There tends to be some confusion about when a pre-licensee is considered a trainee as opposed to an associate and about what those two terms mean. A trainee is defined as “unlicensed person who is currently enrolled in a master’s or doctor’s program and who has completed no less than 12 semester units or 18 quarter units of coursework in any qualifying degree program.”⁷ In contrast, an associate is defined as “an unlicensed person who has earned his or her master’s or doctor’s degree qualifying him or her for licensure and is registered with the Board.”⁸

The distinction between trainees and associates is often critical in determining who may ultimately be charged for supervision. A trainee who is working to fulfill licensing or professional experience requirements does not have to be classified as an employee in cases where the training is part of an established course of study at an accredited school or approved institution and if the training is academically oriented and is for the benefit of the trainee.⁹

This means, unlike associates, the majority of trainees will not be classified as employees because most gain their hours at training facilities. Trainees who are not classified as employees, trainees who are volunteers in the above situation, can lawfully be charged for supervision and other training by the sites where they are obtaining their hours.

Outside Supervision
Associate MFTs or trainees who work in exempt settings (non-private practices) where supervision and/or registration is not a requirement of employment (or volunteering) may pay for offsite supervision. The Division of Labor Standards Enforcement has stated in an opinion letter that “there is generally no requirement that an entity pay for training leading to licensure or the cost of licensure for an employee.”¹⁰0

Entities should be aware, however, that where registration and/or clinical supervision is a requirement of employment (or volunteering), provisions of California Labor Code Section 2802 would require the entity to reimburse the cost of supervision. When considering the issue of offsite supervision, also remember that associates who work in private practice settings may not have an offsite supervisor.¹¹

The Board of Behavioral Sciences Supports the Interpretation That It Is Unlawful to Charge Trainees and Associate MFTs for Supervision
Comments made by former Staff Counsel for the Department of Consumer Affairs, Board of Behavioral Sciences, James Maynard, during a discussion of the topic of payment for supervision at an October 2009 meeting of the Board, further supports the position that employed trainees and associates cannot lawfully have wages deducted as payment to employers for supervision.

“California Labor Code prohibits an employee for paying an employer for most services without prior written agreement and then only in a limited number of narrow categories. There is no scenario under which it would be appropriate for a supervisee to pay an employer for supervision.”

A 2009 Memorandum authored by Maynard and made public as part of a discussion of the BBS’s Policy and Advocacy Committee meeting in March of 2010 also affirms the assertion, that under California law, an employer cannot lawfully charge employed trainees and associates for supervision.

“If an employer pays an employee wages, that employer is generally prohibited from deducting money from an employee’s wages. (Cal Labor Code §§ 216, 221.) This would include a practice where the employee is paid the full amount of his or her full wages and is then required to pay a certain amount back to the employer to cover the costs of supervision. (See Cal. Labor Code § 221.)

A copy of the memorandum can be found on the BBS’s website at www.bbs.ca.gov/pdf/agen_notice/2010/0310_poladv_mtg_material.pdf.

Suggestions to Entities
Labor and employment law is a very complex subject. An employer must take into account any applicable state and federal laws when determining how best to structure an employment relationship. It is important for California employers to be aware that the state’s labor and employment laws differ significantly from their federal counterparts and that many California employers are required to comply with both sets of laws. In cases where a conflict exists between federal and state law, the law that is more favorable to the employee will control.

A majority of the federal rules regarding wage and hour issues are found in the Fair Labor Standards Act of 1938. The Fair Labor Standards Act (FLSA) prescribes standards for wages and overtime pay, which affect a majority of public and private employment relationships. The Act requires employers to pay employees at least the federal minimum wage and overtime pay of one-and-one half times the regular rate of pay. The Federal Minimum Wage is $7.25.

The state’s wage and hour scheme is overseen by the Industrial Welfare Commission (“IWC”). The IWC determines the wages and hours in a number of industries. The IWC also sets the state’s minimum wage ($8.00 per hour, with the exception of San Francisco where the minimum wage is $10.74 per hour) through documents known as Wage Orders that set forth the wage and hours requirements for a particular industry or occupation. Wage Order #4 applies to professional, technical, clerical, and mechanical occupations. Wage Order #5 applies to public housekeeping, including hospitals, rest homes, private schools, and colleges and universities that offer board or lodging to students. Trainees or Associate MFTs who are employed in these settings would fall under the applicable Wage Order.

These Wage Orders can be downloaded from the IWC website at www.dir.ca.gov/iwc/ and would serve as an appropriate point of reference for those who employ therapists.

Associate MFTs employed in private practice are customarily paid between thirty and seventy percent of the fees they generate. The law encourages employers to provide associates “fair remuneration.”¹² The term “fair” is to be determined by the parties involved and is not defined in law. For example, an employer could argue that any payment above minimum wage is “fair.” As long as they ultimately receive at least minimum wage for the hours they spend working, pre-licensees may be paid a number of ways. They may be paid a salary (i.e. $12,000 a year). They may be paid based upon a specified amount per hour ($12 per hour). Or, associates and trainees may be paid a percentage of the fees generated. For example, a pre-licensee who generates $800 a week, and works 25 hours, could be paid $240 (or 30 percent) of the fees he or she generates each week. This type of negotiated split between the pre-licensee and the employer is not only a common way of handling employment relationships with pre-licensees, but also satisfies minimum wage requirements and would be considered a fair remuneration for services rendered as encouraged by the California Business and Professions Code related to associate pay.

For more information about how to structure employment relationships, employers should consult with labor and employment attorneys who specialize in that area of law.

Potential Penalties for Charging Employees for Supervision
There are a number of government entities that regulate employment relationships including the State Departments of Labor, the United States Department of Labor (“DOL”), and the Internal Revenue Services (“IRS”).

Under California Labor Code Section 216, it is a misdemeanor to deny an employee wages he or she has earned.

“In addition to any other penalty imposed by this article, any person, or an agent, manager, superintendent, or officer thereof is guilty of a misdemeanor who: (a) Having the ability to pay, willfully refuses to pay wages due and payable after demand has been made. (b) Falsely denies the amount of validity thereof, or that the same is due, with intent to secure for himself, his employer or other person, any discount upon such indebtedness, or with intent to annoy, harass, oppress, hinder, delay or defraud the person to whom such indebtedness is due.”

Employers who work with trainees and associates should also be aware that part of the United States Department of Labor’s Strategic Plan for 2011-2016 is to ensure that the nation’s most vulnerable workers (associates/trainees included) are appropriately paid. As a result, the Department’s Wages and Hours Division has added more than 350 new investigators during the past two years to regulate employers who work with associates/trainees. This includes doing the analysis of whether the associate/trainee is properly classified as a volunteer versus employee.

When the DOL audits an employer and finds that an employee was not paid and/or classified appropriately, the DOL assesses what is due (i.e., compute back wages from payroll records and witness statements) and sends the employer a “Charging Letter.” The employer then has 30 days to request a hearing before an Administrative Law Judge (“ALJ”) who is employed by the DOL. An employer may negotiate a settlement, pay or appeal the ALJ’s ruling. Wages are assessed at the gross amount that is due to the employee and the employer pays the DOL. The DOL then remits taxes appropriately, then remits net wages to the employee. An employer found in violation of the labor laws would also be subject to IRS penalties and interest for late payments.

Conclusion
There are circumstances under which it is lawful and, therefore, appropriate to charge trainees and associates for supervision. However, it is the opinion of CAMFT that, generally speaking, an employer who charges for supervision will likely be in violation of California labor laws unless one of these exceptions noted above applies. CAMFT has consulted with labor law attorneys to provide our membership (employers, employees, supervisors, and volunteers) with the best analysis on this subject.

This article is merely intended to serve as a general guideline for those who employ trainees and associates in California, given the complex nature of the subject of employing trainees and associates who require supervision.

The article should not be used as a substitute for independent legal advice or representation.

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Endnotes

¹ California Labor Code Section 221: “It shall be unlawful for any employer to collect or receive from an employee any part of wages theretofore paid by said employer.”; California Labor Code Section 450: “(a) No employer, or agent or officer thereof, or other person, may compel or coerce any employee, or applicant for employment, to patronize his or her employer, or any other person, in the purchase of anything of value.”; California Labor Code Section 2802: “An employer shall indemnify his or her employee for all necessary expenditures or losses incurred by the employee in direct consequence of the discharge of his or her duties, or of his or her obedience to the directions of the employer, even though unlawful, unless the employee, at the time of obeying the directions, believed them to be unlawful.”; California Business and Professions Code Section 4980.43(i): “Trainees and associates...shall not lease or rent space, pay for furnishings, equipment or supplies, or in any other way pay for the obligations of their employers.”
² California Labor Code § 221
³ California Labor Code §§ 221, 224
⁴ California Labor Code §450
⁵ California Labor Code 450, 2802 and California Business and Professions Code §4980.43(i)
⁶ Department of Industrial Relations, Department of Labor Standards Enforcement (“DLSE”) OLs 2010.04.07, http://www.dir.ca.gov/dlse/opinions/2010-04-07.pdf
⁷ California Business and Professions Code §4980.03
⁸ Id.
⁹ Department of Industrial Relations, Department of Labor Standards Enforcement (“DLSE”) OLs 1993.1.7, 1993.09.07, 1996.12.30, 1998.11.12, 1998.11.12-1, 2000.05.17
¹⁰ DSLE Op. Ltr. 1994.11.17
¹¹ 1 California Business and Professions Code §4980.43(e)(4)
¹² California Business and Professions Code § 4980.43