In yet another challenge regarding the employment status of students and interns as employees, the Second Circuit has concluded quite rightfully that vocational students – even those at for-profit institutions – are still students.
We've seen this argument before in the context of both students and interns. ( November 15, 2018 , December 12, 2017, and May 13, 2013) Citing various tests, the plaintiffs challenge their status as interns or students, and contend that instead they were actually employees entitled to the minimum wage and overtime under the Fair Labor Standards Act (FLSA). These claims caused many internship opportunities to dry up, and have rarely succeeded, but they are still brought on occasion anyway.
In Velarde v. GW GJ, Inc., Case No. 17-330 (2d Cir. Feb. 5, 2019), the plaintiff was a student at a for-profit cosmetology school who enrolled to learn skills such as barbering, hairstyling, skin and body treatments, and manicure and pedicure services. To obtain the required state cosmetology license at the end of that program, he needed 1,000 hours of practical training. In addition to classroom courses, the school operated a salon where students could obtain that training. The salon provided discounted prices to its clientele based on the student's relative experience. This was the proverbial win-win-win, as the student obtained experience, the school generated revenue from the customers and customers received services at a discount. The plaintiff, however, contended that based on his calculation, the salon actually turned a profit. He also complained of having to do repetitive tasks and cleanup work, and about the quality of instruction generally. He brought suit under the FLSA and under New York state law on his own behalf and on behalf of the other students for claimed unpaid wages and overtime. He sued not only the school, but also its two owners personally.
The Second Circuit applied the now relatively settled "primary benefit" test first announced in Glatt v. Fox Searchlight Pictures, Inc., 811 F.3d 528 (2d Cir. 2015). We blogged that case and some of its progeny here. It had little difficulty in concluding that the students were the primary beneficiaries of the training. They received the necessary 1,000 hours of practical instruction. That instruction prepared them for the state licensing examination and was related to the formal classroom studies. The school provided and paid employees to supervise their work in the salons. And, of course, the students knew all along that they would not be paid for the time they spent working in the salon.
The court rejected the arguments that the school could have provided better-quality instruction or given the students greater flexibility. It similarly found without merit the claim that the school should not have been permitted to (at least arguably) profit from student work. Thus, it concluded that the students were students and not employees, and affirmed dismissal of the case.
The Velarde case is one of a series of cases that should die a deserved death. Barring a sham student arrangement, schools should be able to provide vocational training without fear that their students will later be considered to be employees entitled to wages. Here, the threat was even worse, as the owners were named personally. As more defendants succeed in these cases, it is hoped that fewer such cases will be brought in the future.
The bottom line:
Vocational training (and internships) generally aren't employment if the arrangement is primarily for the benefit of the student or intern. Really.
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