Category: Labor Law

Second Circuit Applies “Primary Beneficiary” Test to Distinguish “Employees” from “Bona Fide Students” in For-Profit, Vocational Training Context, Upholding Dismissal of Former Cosmetology Student’s Claims for Compensation for Services Performed in Student Salon During Training

Case Name: Velarde v. GW GJ, Inc., et al.

Date of Opinion: February 5, 2019

Opinion by: Judge ­­­­­Carney

Summary:

The Second Circuit considered whether Glatt’s “primary beneficiary” test, used to distinguish “employees” from “bona fide interns” under state and federal wage laws, applies to individuals enrolled in a for‐profit vocational academy who are preparing to take a state licensure examination and who must first fulfill state minimum training requirements.

In 2014, Plaintiff-Appellant Patrick Velarde sued the Academy, a for‐profit cosmetology training school operated by the individual defendants, for unpaid wages in violation of the Fair Labor Standards Act (“FLSA”) and Articles 6 and 19 of the New York Labor Law (“NYLL”). Velarde had enrolled in defendants’ program in April 2011, completed the 1,000-hour course of study in November of that year, and became a licensed cosmetologist in New York in 2012. In his suit, Velarde alleged he was required to perform cosmetology services without compensation in the Academy’s student salon as a part of his vocational training at the Academy for becoming a licensed beautician, and that this requirement violated state and federal wage laws.

The United States District Court for the Western District of New York granted judgment on the pleadings to the Academy, reasoning under the test established in Glatt v. Fox Searchlight Pictures, Inc, 811 F.3d 528 (2d Cir. 2015) that Velarde was not an “employee” entitled to compensation under the FLSA and NYLL statutes because he was the “primary beneficiary” of his relationship with the Academy. On appeal to the Second Circuit, Velarde argued the district court erred in applying Glatt’s primary beneficiary test in his situation as he was not an intern. Instead, he reasoned, he was an “employee” entitled to compensation based on the “immediate advantage” that the Academy received from his labor in the form of customer payments for the salon services.

Although the Second Circuit agreed with Velarde that the Academy’s benefits from his work during his time in the program was relevant to determining if it “employed” him for FLSA purposes, it reiterated its holding in Glatt that this was merely one factor bearing on the analysis. It agreed with the district court that Glatt’s primary beneficiary test, developed as a way to distinguish between “employees” and “bona fide interns,” properly applies to distinguishing between “employees” and “bona fide students” in the vocational training context. Continue reading