7th Circuit Says Beauty School Student Not An Employee

On August 14, in Hollins v. Regency Corp., the Seventh Circuit Court of Appeals affirmed a decision from the U.S. District Court for the Northern District of Illinois that a cosmetology student who worked at her beauty school's salon was not an employee of the school. Regency Corporation operates for-profit cosmetology schools in 20 states. Regency requires that students complete 1,500 hours of classroom and hands-on work, which they accomplish by working in the school's salon. Customers pay discounted prices. The students are not paid, but receive licensing hours and academic credit.

Venitia Hollins claimed her work at the school salon was compensable under the Fair Labor Standards Act (FLSA). She brought a collective action under the FLSA and a class action under state statutes. The district court granted summary judgment for the school on liability and denied Hollins's motion for conditional class certification as moot.

The court discussed the many tests available to help courts distinguish between employees and unpaid trainees, including the Department of Labor's six-factor test concerning internships, and the multiple factors set forth in the ALI Restatement (Second) of Agency §220. The district court had rejected these tests and instead looked to the Supreme Court's decision in Walling v. Portland Terminal Co., 300 U.S. 148 (1947), for guidance. Walling involved unpaid persons who participated in a course of practical training for prospective employment as yard brakemen. The Supreme Court concluded that the Walling trainees were not employees, even though they performed useful work that was sometimes identical to that of the regular employees. The Supreme Court's decision in Walling is difficult to parse because the Court recognized that "without doubt the Act covers trainees, beginners, apprentices, or learners if they are employed to work for an employer for compensation." The Court found that the railroad employers received "no immediate advantage from any work done by the trainees."

Relying on Walling, in Glatt v. Fox Searchlight, Inc., 811 F.3d 528 (2d Cir. 2015), the Court of Appeals for the Second Circuit articulated the "primary benefit test," which asks "whether the intern or the employer is the primary beneficiary of...