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Nesbitt v. FCNH, Inc.

United States Court of Appeals, Tenth Circuit

November 9, 2018

RHONDA NESBITT, individually, and on behalf of all others similarly situated, Plaintiff - Appellant,
v.
FCNH, INC.; VIRGINIA MASSAGE THERAPY, INC.; MID-ATLANTIC MASSAGE THERAPY, INC.; STEINER EDUCATION GROUP, INC.; STEINER LEISURE LTD.; SEG CORT LLC, d/b/a Steiner Education Group, Defendants - Appellees, and NATIONAL EMPLOYMENT LAWYERS ASSOCIATION AND ECONOMICS/BUSINESS PROFESSORS (WILLIAM H. KAEMPFER, NADELLE GROSSMAN, PAULA COLE, and MIRIAM CHERRY), Amici Curiae.

          Appeal from the United States District Court for the District of Colorado (D.C. No. 1:14-CV-00990-RBJ)

          David H. Miller (and Adam Harrison of Sawaya & Miller Law Firm, on the briefs), Denver, Colorado, for Plaintiff - Appellant.

          Todd Wozniak of Greenberg, Traurig, L.L.P., Atlanta, Georgia (and Jeffrey M. Lippa of Greenberg, Traurig, L.L.P., Denver, Colorado, with him on the brief), for Defendants -Appellees.

          Scott A. Moss of Moss Law Practice and Hunter A. Swain of King & Greisen, L.L.P., Denver, Colorado, for Amici Curiae.

          Before McHUGH, KELLY, and MORITZ, Circuit Judges.

          KELLY, CIRCUIT JUDGE

         Plaintiff-Appellant Rhonda Nesbitt is a former massage therapy student who attended a for-profit vocational school operated by Defendants-Appellees ("Steiner"). Ms. Nesbitt, on behalf of a class of former students, brought suit claiming the students qualified as employees of Steiner under the Fair Labor Standards Act (FLSA), 29 U.S.C. §§ 201-219, and alleging Steiner violated the FLSA by failing to pay minimum wage. The district court granted summary judgment in favor of Steiner, holding that the students were not employees of the schools under the FLSA. See Nesbitt v. FCNH, Inc., 217 F.Supp.3d 1288, 1298 (D. Colo. 2016). Our jurisdiction arises under 28 U.S.C. § 1291 and we affirm.

         Background

         Steiner operated for-profit vocational schools in multiple states. 1 Aplt. App. 6-7; 2 Aplt. App. 129. Steiner schools' curriculum included classroom and clinical education required for one to become licensed as a massage therapist. 2 Aplt. App. 130-31. The clinical component included approximately 100, fifty-minute massages, which counted toward the minimum clinical hours necessary for students to acquire their state licenses. Id. at 131-32. The massages were performed at Steiner facilities on members of the public, who paid discounted rates for the massages. Id. at 132. Because the Steiner facilities did not have rooms dedicated to massage training, the students would clear classrooms of desks and chairs and erect massage tables surrounded by privacy curtains for clinical training. 4 Aplt. App. 474-75, 482-83. Each student would lead his or her client to a booth that included a massage table and chair with enough space for the student to make a circuit around the massage table and perform the massage. Id. at 475- 76. While the massages took place, there ostensibly were clinic managers and teaching assistants on site to supervise the students and provide feedback on their massages. 2 Aplt. App. 131-32. In theory, these supervisors were available to answer questions from students and to facilitate the clinic's operations. Id. The parties dispute the extent to which these supervisors actually provided feedback or answered questions during the clinic.[1] Compare Aplt. Br. at 24-26, with Aplee. Br. at 24-26. After the students completed their massages, the clients were asked to provide feedback on the massages they received, id. at 132, though the parties dispute how often these clients actually completed their feedback forms and how often feedback was given to students. Compare Aplt. Br. at 28, with Aplee. Br. at 27. Following each massage, students would lead their client out and prepare their workspace for the next client. See, e.g., 4 Aplt. App. 438, 442-43, 447. They would typically repeat this process for five clients each clinical day. See, e.g., id. at 443, 447, 454. Ms. Nesbitt alleges Steiner profited from the clinics with the students as free labor. Aplt. Br. at 31.

         Rhonda Nesbitt brought her class-action suit under the FLSA in the District of Colorado on April 7, 2014.[2] 1 Aplt. App. 1. Steiner moved to compel arbitration of the claims and to prohibit litigation of the issues as a class. Id. at 39-53. The district court denied that motion, Nesbitt v. FCNH, Inc., 74 F.Supp.3d 1366, 1375 (D. Colo. 2014), and this court affirmed. Nesbitt v. FCNH, Inc., 811 F.3d 371, 381 (10th Cir. 2016).

         On remand, the district court addressed the issue of whether Ms. Nesbitt and the students she seeks to represent qualified as employees under the FLSA. The district court found they did not. Nesbitt, 217 F.Supp.3d at 1298. The district court determined that the six factors announced in Reich v. Parker Fire Protection District, 992 F.2d 1023 (10th Cir. 1993), when considered in their totality, resulted in a finding that the students were not employees of Steiner. Nesbitt, 217 F.Supp.3d at 1294. The district court came to that conclusion because (1) the students received vocational training from Steiner, (2) the training primarily benefited the students because they were required to complete hours of clinical time for their licenses, (3) the students did not displace regular employees and worked under supervision of Steiner instructors, (4) there was no genuine issue of material fact regarding the profit Steiner made from operating its schools, (5) the students were not entitled to employment upon completion of their training, and (6) the students and Steiner both understood that the students were not entitled to wages during their time spent training. See id. at 1294-98. Accordingly, the district court granted summary judgment in favor of Steiner on the question of Ms. Nesbitt's FLSA claim. Id. at 1298; see also Nesbitt v. FCNH, Inc., No. 14-cv-00990-RBJ, 2017 WL 916453 (D. Colo. Mar. 2, 2017). This appeal followed.

         Discussion

         We review a district court's grant of summary judgment de novo. Birch v. Polaris Indus., Inc., 812 F.3d 1238, 1251 (10th Cir. 2015). The legal determination whether an individual is an "employee" under the FLSA is also reviewed de novo. Reich, 992 F.2d at 1025.

         The FLSA requires that - subject to certain exceptions - every employer pay its employees a specified minimum wage and time-and-a-half for hours worked over forty in a workweek. See 29 U.S.C. §§ 206-207. The FLSA defines an employee as "any individual employed by an employer." Id. § 203(e)(1). In 1947, the Supreme Court distinguished between employees, who are entitled to wages under the FLSA, and trainees, who usually are not. See Walling v. Portland Terminal Co., 330 U.S. 148, 153 (1947). In that case, the Court held that prospective railroad brakemen who received on-the-job training, but were not paid during the training period, were not entitled to wages under the FLSA. Id. From Portland Terminal, the Department of Labor (DOL) developed a ...


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