It’s Cut and Dry: Ninth Circuit Adopts “Primary Beneficiary” Analysis, Concludes Cosmetology and Hair Design Students Were Interns, Not Employees
Former students at a cosmetology and hair design school with locations in California and Nevada were interns and not employees entitled to wages under the FLSA or state law, the Ninth Circuit has held. Benjamin v. B&H Education, 2017 U.S. App. LEXIS 25672 (9th Cir. Dec. 19, 2017). In so concluding, the Ninth Circuit adopted the non-exhaustive, multi-factor “primary beneficiary” test established by the Second Circuit in Glatt v. Fox Searchlight Pictures, Inc., 811 F.3d 528 (2nd Cir. 2016) (discussed at length here], concluding that this test “best captures the Supreme Court’s economic realities test in the student/employee context and that it is therefore the most appropriate test for deciding whether students should be regarded as employees under the FLSA.”
In applying the factors set forth in Glatt, the Ninth Circuit found that each of the seven enumerated factors supported a determination that the plaintiffs were the “primary beneficiaries” of their time spent in the clinical settings required for licensure by the respective states – and therefore were not employees – despite the fact that the school derived some income from individuals receiving the salon services. Those factors included an acknowledgment by the students that they would not be paid for their clinical services; they received hands-on training and academic credit for their efforts; their clinical work was coordinated with their academic schedules; the clinical work satisfied the practical hours required prior to taking state licensing exams and ended once a sufficient number of such hours was achieved; they did not displace paid employees of the school; and they had no expectation of employment with the school after graduation.
Finally, the Court of Appeals likewise held that the students were not employees with respect to claims under California or Nevada law. While Nevada’s definition of “employee” mirrors that of the FLSA, and therefore made for an easy dismissal of claims under that state’s law, California’s definition focuses on the employer’s “right of control” of an individual’s wages under the applicable wage order. Nevertheless, the Ninth Circuit concluded that “the California Supreme Court would have no reason to look to the wage order definition” because the plaintiffs “were never hired by any entity as an employee. They are not entitled to be paid any wages.” Thus, the “right of control” analysis is inappropriate in such a school setting, the Court of Appeals held. Rather, it opined that the California Supreme Court “would instead apply a test more similar to the FLSA primary beneficiary test” because it “is better adapted to an occupational training setting than the [more rigid] DOL factors [rejected in Glatt].”
With its decision in Benjamin, the Ninth Circuit joins not only the Second Circuit in adopting the “primary beneficiary” analysis, but the Eleventh Circuit as well, which adopted the analysis in Schumann v. Collier Anesthesia, P.A., 803 F.3d 1199 (11th Cir. 2015). By contrast, in a recent case with facts substantially similar to those of Benjamin, the Seventh Circuit rejected the DOL’s approach but declined to adopt any particular test. Hollins v Regency Corp., 2017 U.S. App. LEXIS 15076 (7th Cir. Aug. 14, 2017) (discussed here).
Benjamin provides additional support and guidance to employers assessing an existing or contemplated internship program.