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California Court Confirms that Employers Can Still Employ Unpaid Interns in Certain Cases

Recently, the DOL’s preferred test for whether employers must pay their interns has been under attack, an issue I’ll address more directly in a future post. Put simply, the scope of lawful unpaid internships has narrowed substantially in recent years, spurring some discussions and re-examinations of many internship programs to ensure that they actually meet an educational purposes as the FLSA requires. The DOL’s aggressive enforcement has meant that employers have needed to reexamine whether their unpaid internships are actually unlawful free labor.

However, a recent California case demonstrated that employers can still use unpaid interns in some situations. In at least the third case of its kind (at least two others are on appeal in federal courts), a beauty school student filed an FLSA lawsuit seeking unpaid wages from a for-profit beauty school with locations around the country.  The student claimed that services she provided to customers during her training, along with other salon duties (such as selling salon products when not cutting hair, were essential to the beauty school’s business operations.  Accordingly, she claimed that the school’s students were actually employees who were owed the minimum wage under the FLSA.

As in prior beauty school cases, the school responded that the students were simply performing “clinical” work at the salon as a prerequisite to California cosmetology licensing.  In California, like other states, an individual seeking a cosmetology license must attend a licensed beauty school and work a certain amount of hours in a clinical setting.  Under the school’s view, this clinical setting necessarily must include providing cosmetology services to the public.  Although the cost of services is lower than the market rate, the school does still turn a profit.

The court agreed, holding that “Clinical work is an essential part of these students’ training,” since state cosmetology boards require many hundreds of hours of training to qualify for a license. The fact that students “worked in a realistic salon environment isn’t enough to show that their work served a business purpose over an educational purpose. . . . Working on paying customers has obvious educational value in preparing students for careers.”  The court also noted that the clinical program was not intended to provide students with a long term job or the beauty school with its primary income (which was the tuition-paying student).  Once the program ended and the students met their statutory requirements, they would have to find an actual job.

Upshot for Employers

To me, cases like these say more about the relative absurdity of the myriad boards and licensing commissions in the states for everything from cosmetology to eyebrow threading to horse massage.  Certainly, beauty school students do receive some valuable career training, but it seems strange to call a for-profit beauty school selling services to the public a “clinical setting.”  Nonetheless, true clinical programs whose primary aim is to provide skills to students–especially when those skills lead to state licensure–remain one of the domains that employers can still employ unpaid interns.  However, these decisions are generally outliers.  With the DOL’s continued crackdown on unpaid internships, employers need to carefully evaluate any internship programs to ensure that they do meet the FLSA’s requirement that such programs serve primarily an educational purpose.

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