- Massage therapy students at a multi-state, for-profit vocational school are students, not employees, the 10th U.S. Circuit Court of Appeals has ruled (Nesbitt, et al. v. FCNH Inc., Virginia Massage Therapy, Inc. Steiner Education Group (10th Cir., Nov. 9, 2018)). The court reached that decision after hearing a former student’s claims that she and the other students should have been paid for the reduced cost massages they performed to meet the clinical requirements to obtain a license.
- The school's curriculum included classroom and clinical education requirements. The clinical component included 100 50-minute massages, which were performed on the public at a discount at the schools’ facilities and under supervision. Rhonda Nesbitt sued the school's operator, claiming that she and the other students were employees under the Fair Labor Standards Act (FLSA) and should have been paid minimum wage. Nesbitt said the school profited from the clinics, using students as free labor. The district court disagreed, explaining that four of the factors in a six-factor test — a test established by the U.S. Department of Labor (DOL) and adopted by the 10th Circuit — for determining whether a trainee is an employee suggested that the students were not employees, as did applying "totality of the circumstances" and "entirety of the economic realities" tests.
- The appeals court affirmed, noting that: the hours the students spent performing massages as part of their curriculum allowed them to advance toward their minimum licensing requirements and provided them an obvious benefit; the students were aware that the company operated schools, not massage therapy businesses; and both the students and the operator understood the students were not entitled to wages for their training. In fact, the court said, state law prohibits employers from paying unlicensed massage therapy students a wage before they have completed their training and state licensing requirements.
DOL relaxed its standards for hiring unpaid interns earlier this year. The federal agency scrapped an Obama-era test that required six criteria to be met before interns could go unpaid. Employers found one requirement — that they could derive no immediate advantage from the intern’s work — especially challenging.
Several federal appeals courts had rejected DOL’s test and adopted a primary beneficiary test, which DOL moved to in 2018. The more flexible test allows stakeholders to look at the big picture, using seven factors designed to guide decisionmakers in examining the "economic reality" of the intern-employer relationship to determine which party is the "primary beneficiary" of the relationship.
Experts disagree on whether the move will bring an increase in the use of unpaid interns. But it may at least revive some intern programs that were previously scrapped, James Paul, a shareholder in Ogletree Deakins’ St. Louis office, previously told HR Dive. Employers had scaled back their programs because of the previous DOL's "aggressiveness." With a less-strict standard in place, many organizations will be confident they can meet that test, he said.