Concluding that a student at a for-profit cosmetology academy was the “primary beneficiary” of the hours he spent training at the academy’s salon, the Second Circuit Court of Appeals has upheld the district’s court’s determination that the student was an intern, and not an not employee entitled to minimum wage or overtime under the FLSA or the New York Labor Law. Velarde v. GW GJ, Inc., 2019 U.S. App. LEXIS 3536 (2d Cir. Feb. 5, 2019). The Second Circuit has jurisdiction over New York, Connecticut and Vermont.

In 2011, the plaintiff enrolled in the Academy, a for-profit cosmetology training school operating in Erie County, New York. That same year, he completed the training program, a 1000-hour course of study approved by the state. The Academy program included about 300 hours of classroom instruction and 700 hours of supervised practical experience in the school’s student salon, where members of the public can receive discounted cosmetology services while the students refine their skills. Several years after completing the program and obtaining his cosmetology license, the plaintiff sued the Academy, claiming that it violated the FLSA and state law by failing to pay him for the work that he did in the salon while enrolled as a student.

Upholding the district court’s grant of judgment on the pleading to the defendants, the Second Circuit reviewed the “totality of the circumstances” of the plaintiff’s training program, in light of the multi-factor analysis it set forth in Glatt v. Fox Searchlight Pictures, Inc., 811 F.3d 528 (2d Cir. 2016). Those non-exhaustive factors include:

(1)        the extent to which the intern and employer clearly understand that there is no expectation of compensation;

(2)        the extent to which the internship provides training similar to that given in an education environment, including clinical or other hands-on training;

(3)        the extent to which the internship is tied to the intern’s formal education program through integrated coursework or credit;

(4)        the extent to which the internship accommodates the intern’s academic calendar;

(5)        the extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning;

(6)        the extent to which the intern’s work complements, rather than displaces, that of paid employees; and

(7)        the extent to which the intern and employer understand that there is no entitlement to employment following the internship.

The Second Circuit noted that some of these factors were less applicable in the vocational training context than in other internship programs (for example, the absence of an expectation of future employment with the institution). Nevertheless, the Court of Appeals readily concluded that the plaintiff was the primary beneficiary of the school’s program, including the time spent at the salon honing his practical skills, given that without such a program, the plaintiff would not satisfy the state’s requirements to obtain his cosmetology license. The mere fact that the Academy derived some benefit from the practical training (i.e. any profits it received from the salon services provided to the public) did not necessarily mean that the school was the primary beneficiary.

In reaching its decision, the Second Circuit cited a very similar opinion from the Seventh Circuit, discussed here, in which that Court of Appeals likewise concluded that cosmetology students were interns and not employees. While the Second Circuit and other courts have noted that such intern-or-employee lawsuits must be assessed on a case-by-case basis, Velarde nevertheless provides practical guidance to businesses constructing both vocational training programs and general internship programs. Employers establishing such programs should benchmark them against Velarde and other appellate guidance.