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Yoga For Trade Program May Cost Franchise $1.65M

Published by and on May 17, 2017

Does the popular yoga labor exchange model run afoul of state and federal minimum wage law?

Does the popular yoga labor exchange model run afoul of state and federal minimum wage law?

The U.S. District Court of the Northern District of California preliminarily approved a $1.65 million dollar class action settlement on behalf of a class of yoga students who worked a weekly shift doing custodial duties in exchange for free or discounted membership for the Denver-based, CorePower Yoga franchise.

The lead plaintiff in the case alleged that the “Yoga for Trade” program participants worked two to three hour shifts as cleaners in exchange for free yoga classes. After phasing out the Yoga for Trade program, the studios allowed the students be part of the Studio Experience Team and paid the participants an hourly wage to perform custodial duties but part of their wage would go towards the purchase of a discounted membership. The Plaintiffs allege these programs violated the Fair Labor Standards Act and state minimum wage laws because their benefit in the form of either free or discounted membership was less than the minimum wage. The class members are comprised of approximately 7,600 students in California who participated in CorePower Yoga’s various yoga for trade programs, and an additional 6,800 students outside California who participated in these programs.

This model is common across yoga studios around the country, however, the FLSA requires that covered employers pay nonexempt employees $7.25 per hour for every hour worked. In California the minimum wage is $10.50 per hour and, regardless of how the wage is calculated, employers are required to pay employees cash, check payable on demand without discount or fee, or with the employees consent, by direct deposit. Cal. Labor Code §§ 212-213. California employers are required to provide employees with paystubs indicating gross wages, total hours worked, any deductions, and other information listed in section 226 of the California Labor Code.

While some yoga studios consider these programs “internships” or “volunteer programs,” a for-profit business cannot simply avoid paying lawful wages by labeling their employees “volunteers” or “interns,” even if the employees consent to the arrangement. There are a number of laws that apply to unpaid interns. The California test significantly mirrors the DOL’s six-factor test for unpaid interns, including requirements that the training be similar to that which would be given in vocational school, it is for the benefit of the trainee, the trainee does not displace regular employees, and the employer does not derive an immediate benefit from the trainee’s activities, among other factors.

On the other hand, a volunteer is an individual who “performs work for civic, charitable, or humanitarian reasons, for a public agency or corporation qualified under Section 501(c)(3) of the Internal Revenue Code as a tax-exempt organization, without promise, expectation, or receipt of any compensation for work performed.” Labor Code § 1720.4(a)(1). Considering these various factors, people who perform custodial duties in exchange for membership benefits at a for-profit studio would not likely be considered volunteers or interns. Performing these tasks would likely make the person an employee entitled to minimum wage under the FLSA and state law.

Welter Insights

This settlement should alert other yoga studios and, businesses generally, that if they are operating a similar model, they may be running afoul of state and federal wage and hour laws and may also be at risk of defending a lawsuit.

To avoid these types of violations, employers should review their compensation practices regularly and stay apprised of federal, state, and municipal wage laws. If you have concerns about compliance with federal or state wage and hour law, please contact a Welter Law attorney.

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