144 F. Supp. 3d 990
N.D. Ill.2015Background
- Hollins, a cosmetology student at Regency Beauty Institute (for-profit, accredited), performed required supervised services on paying customers as part of a state-mandated 1500-hour curriculum that combined classroom and on‑floor practical training.
- Regency’s program included a rehearsal (classroom) phase and a performance (student salon) phase; students earned required academic/practical credit minutes for time on the performance floor and were not paid.
- Regency charged below-market fees for student‑provided services; the performance‑floor revenue formed part of Regency’s business receipts, but whether it produced profit was disputed.
- Hollins sues under the FLSA (and related Illinois/Indiana wage statutes) seeking wages for time spent providing services on the performance floor, alleging the students were employees rather than trainees.
- Regency moved for summary judgment, arguing the students were trainees/primary beneficiaries of the educational program and thus not “employees” under the FLSA; the court granted Regency’s motion.
Issues
| Issue | Hollins' Argument | Regency's Argument | Held |
|---|---|---|---|
| Whether students working on the performance floor are "employees" under the FLSA | Students provided valuable labor that produced revenue/profit for Regency and displaced licensed cosmetologists; therefore they are employees entitled to wages | The clinical work was required by law, educational in nature, tied to credit and licensure, and primarily benefited students, so they are not employees | Court: Students are trainees; Regency entitled to summary judgment (not employees under FLSA) |
| Relevance of economic benefit to Regency | Any economic benefit/profit from student services makes Regency the primary beneficiary and thus an employer | Any benefit to Regency is incidental/derivative of the educational mission and does not convert students into employees | Court: Incidental/derivative economic benefit insufficient to establish employment; student benefit predominates |
| Whether student clinical work displaced paid workers or constituted unfair competition | Charging below‑market fees displaced licensed cosmetologists and thus implicates FLSA’s purpose to prevent unfair competition | Performance floor exists solely to satisfy statutory training; Regency cannot lawfully hire nonstudents to perform those services, so no displacement of employees | Court: No displacement of Regency employees (none existed), no legal basis to convert all student clinical programs into employment based on market displacement |
| Applicability of Portland Terminal/modern intern tests (Glatt factors) | Portland Terminal’s displacement rationale and economic-benefit focus should classify these students as employees | Modern multi‑factor (Glatt) analysis shows students are primary beneficiaries (no pay expectation, academic credit, curriculum integration, limited duration) | Court: Applied Glatt factors; finds students are primary beneficiaries and not employees under FLSA |
Key Cases Cited
- Walling v. Portland Terminal Co., 330 U.S. 148 (training program that provided no immediate advantage to employer weighed against FLSA coverage)
- Glatt v. Fox Searchlight Pictures, Inc., 791 F.3d 376 (2d Cir. 2015) (flexible multi‑factor test for intern/trainee status focused on primary beneficiary)
- Schumann v. Collier Anesthesia, 803 F.3d 1199 (11th Cir. 2015) (endorsing Glatt factors for clinical students pursuing licensure)
- Vanskike v. Peters, 974 F.2d 806 (7th Cir. 1992) (economic‑reality test; prisoners performing required labor not FLSA employees)
- Lauritzen v. Sec. of Labor, 835 F.2d 1529 (7th Cir. 1987) (economic realities/six‑factor framework for employee status)
- Solis v. Laurelbrook Sanitarium and School, 642 F.3d 518 (6th Cir. 2011) (vocational/clinical students not employees where training mission dominates)
- Marshall v. Regis Educ. Corp., 666 F.2d 1324 (10th Cir. 1981) (school‑derived economic value insufficient to override educational benefits)
- Tony and Susan Alamo Foundation v. Secretary of Labor, 471 U.S. 290 (Supreme Court 1985) (non‑monetary benefits can be compensation when workers are dependent; distinguished here)