867 F.3d 830
7th Cir.2017Background
- Regency operated for‑profit cosmetology schools; students paid tuition and were required by state law to complete 1,500 hours including supervised practical work in an on‑site salon (the "Performance Floor").
- Hollins, a student at Regency schools in Indiana and Illinois, sued under the FLSA and various state wage statutes alleging she and other students were employees entitled to wages for salon work.
- Hollins sought class certification under Rule 23 and conditional certification of an FLSA collective; the district court declined to certify and granted summary judgment for Regency on Hollins’s individual claims.
- Several putative collective members filed opt‑in forms with the district court, but the court never conditionally certified the collective or treated the opt‑ins as parties.
- Hollins appealed; the court of appeals first resolved whether the district court’s judgment was final and appealable given the unaccepted opt‑in notices, then reached the merits of whether Hollins was an "employee" under the FLSA.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the district court judgment was final and appealable despite unaccepted FLSA opt‑ins and an uncertified Rule 23 class | The presence of putative opt‑ins and class members prevents finality and deprives the court of appellate jurisdiction | Unaccepted opt‑in notices and unnamed members of an uncertified class are not parties; judgment disposing of the named plaintiff is final | Judgment was final; unaccepted opt‑ins/unnamed class members do not defeat appellate jurisdiction |
| Whether putative collective members became parties by filing opt‑in notices before conditional certification | Opt‑ins argued they should be treated as parties once they filed consent forms | Regency argued conditional certification and court acceptance are required to make opt‑ins parties | Filing opt‑in notices before conditional certification did not make those individuals parties; court acceptance is required |
| Whether Hollins was an "employee" under the FLSA for salon hours (i.e., unpaid trainee vs employee) | Hollins argued Regency derived immediate advantage from students’ work and students effectively worked as employees performing salon services and menial tasks | Regency argued students paid for mandated practical training, received academic credit/licensing hours, were supervised, and the school’s purpose was educational rather than operating a salon business | Court applied an economic‑reality/primary‑beneficiary approach and affirmed summary judgment for Regency: students were trainees, not employees |
| Proper legal test for intern/trainee status under the FLSA | Hollins favored tests that emphasize employer advantage or multi‑factor DOL test | Regency and court relied on Portland Terminal precedent and a primary‑beneficiary economic‑reality inquiry | Court emphasized economic reality (primary beneficiary) and Portland Terminal factors rather than a single employer‑advantage rule or rigid multi‑factor test |
Key Cases Cited
- Smith v. Bayer Corp., 564 U.S. 299 (Sup. Ct. 2011) (unnamed members of an uncertified class are not parties to the litigation)
- Standard Fire Ins. Co. v. Knowles, 568 U.S. 588 (Sup. Ct. 2013) (a plaintiff cannot bind prospective class members before class certification)
- Genesis Healthcare Corp. v. Symczyk, 569 U.S. 66 (Sup. Ct. 2013) (conditional certification does not create independently joined parties; collective action justiciability tied to named plaintiffs)
- Walling v. Portland Terminal Co., 330 U.S. 148 (Sup. Ct. 1947) (trainee performing useful work need not be an employee where employer derives no immediate advantage)
- Glatt v. Fox Searchlight, Inc., 811 F.3d 528 (2d Cir. 2015) (adopted a primary‑beneficiary test focusing on who principally benefits from the intern relationship)
- Espenscheid v. DirectSat USA, LLC, 688 F.3d 872 (7th Cir. 2012) (collective actions revert to individual actions if decertified; opt‑ins do not persist absent certification)