CHICAGO (Legal Newsline) – The U.S. Court of Appeals for the Seventh Circuit has affirmed a decision that a cosmetology student who worked at a beauty school salon was not an employee of the school.

This case argued the question of whether students should be compensated as employees when they are engaged in practical training. It was decided Aug. 14.

“The Seventh Circuit ruled in a way that is consistent with traditional ways of thinking about education,” Karen Baillie, partner at Schnader Harrison Segal & Lewis in Pittsburgh, told Legal Newsline. 

“This particular internship seemed clearly to have been designed for the benefit of the student and not for the benefit of the school as an employer. 

"This case represents a further progression of the recent trend where students seek to be paid as employees. Recently, there have been cases brought by student interns and student athletes seeking wages and graduate students seeking to form unions.”

Plaintiff Venitia Hollins filed an initial complaint on Oct. 25, 2013, against Regency Corp., which operates for-profit cosmetology schools in 20 states as the Regency Salon. Hollins was a Regency student initially at its Merrilville, Indiana, location and later at its Tinley Park, Illinois, facility.

Regency required that students completed 1,500 hours of classroom and hands-on work, which they accomplish by working in the school’s salon. Students were not paid but received licensing hours and academic credit for work on the “Performance Floor.”

Hollins claimed her work at the school salon was compensable under the Fair Labor Standards Act (FLSA) and that Regency violated state wage laws.

Hollins brought a collective action under the FLSA and a class action under state statutes. The district court granted summary judgment in Regency’s favor on liability and denied Hollins’ motion for class certification.

Regency has since gone out of business.

In its ruling, the U.S. District Court for the Northern District of Illinois considered the Supreme Court’s decision in Walling v. Portland Terminal Co

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 despite performing the same work as regular employees.

After rejecting a claim that it lacked jurisdiction, the Seventh Circuit affirmed the district court’s ruling and found that an employment relationship between Hollins and Regency did not exist.

“The Professional Floor was a state‐mandated requirement for graduation from the cosmetology program—i.e., a universal requirement for professional licensure,” wrote Judge Diane Wood in the opinion. 

“Hollins was actually paying for the opportunity to receive both classroom instruction and supervised practical experience. Regency was in the educational business, not in the beauty salon business.”

According to Baillie, the Seventh Circuit was clear about not making a one-size-fits-all decision about all internships because it recognized that internships come in many stripes.

“There has been and continues to be pressure on schools to offer, or require, practical work experience before graduation so that students will be able to become employed and pay back significant debt after graduation. Future cases may be tougher to call.”

But will a decision that allows students to be paid put an end to these types of trade schools?

“Many colleges and universities, as well as trade schools, do not have large endowments and are instead tuition-driven,” Baillie said. “For some trade schools and colleges, any additional costs are difficult to absorb.”

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