By Ronald Miller, J.D.
The district court erred using a new test asking whether the activity in dispute was “‘well beyond the bounds of what could fairly be expected to be part of the internship’ or educational program.”
Although a district court properly focused its partial summary judgment analysis on the specific work performed by students in salons operated by cosmetology schools, rather than on the entirety of the vocational training program in which they participated, the lower court failed to correctly apply the Sixth Circuit’s decision in Solis v. Laurelbrook Sanitarium and School Inc, which governs FLSA claims in an educational setting. Accordingly, the judgment of the district court granting summary judgment to the students was reversed and remanded for the proper application of Laurelbrook. Judge Batchelder issued a separate opinion concurring in part and dissenting in part (Eberline v. Douglas J. Holdings, Inc., December 17, 2020, Cole, R.).
State licensing. Michigan law requires people to obtain a license before they can perform cosmetology services for the public. To earn a license, an individual must either complete a 1,500-hour course of study in a school of cosmetology or a two-year apprenticeship at a licensed cosmetology establishment, and pass a licensing examination. The distribution of instruction time included in a school’s 1,500-hour cosmetology curriculum is set by state regulation. The curriculum must include 965 hours of practical experience.
In this case, a group of Michigan cosmetology schools operated clinic salons where students worked towards the 965-hour practical experience requirement set by the state. The salons are open to the general public, and customers pay for beauty services provided by students supervised by the schools’ instructors. The salons also have a retail floor where apparel, tools, merchandise, skin and hair care products, makeup, and other products are available for sale. Only students perform cosmetology services for customers in the salons.
Salon activities. Students sign an enrollment agreement with the school that does not include any mention of students being compensated for any of their time spent in salons, or for any other portion of their relationship with the schools. The students did not expect to be paid during their time at the school. They also did not have an expectation of employment with the schools upon the completion of their educational training. Although students are not paid for their time in the salons, the schools did make a profit from the salons.
Students were scheduled to work in the salons during set times. In addition to tasks related to training for a career in cosmetology, students could also be asked to do laundry, restock shelves with products sold to customers, clean various stations where customer services are performed, and clean and replace coffee mugs, among other tasks. The students argued that the cleaning and janitorial activities were not included in the school’s curriculum or in the state requirements for cosmetology schools. To the extent that students did not complete the cleaning and janitorial tasks, they fell to paid workers.
Compensation claim. In this case, the students sued the operators of the cosmetology schools alleging that the schools owed them compensation under the FLSA for work performed during their time in school. The district court granted the students’ motion for partial summary judgment on the grounds that the cleaning and janitorial activities were far removed from the educational relationship between the parties and that the schools were taking advantage of the students by forcing them to perform such tasks.
Employment relationship. In applying the FLSA’s definition of employee status, courts have developed tests to analyze the question of whether an employment relationship exists. In Solis v Laurelbrook Sanitarium and School Inc, the Sixth Circuit determined that “the proper approach for determining whether an employment relationship exists in the context of a training or learning situation is to ascertain which party derives the primary benefit from the relationship.” To determine the primary beneficiary, the court looks at factors like whether the purported employee had an expectation of compensation, derives educational value from the work, or displaces paid employees.
Before reaching the primary-beneficiary analysis in this case, the appeals court had to answer two questions. First, was the primary-beneficiary test applied at all when the work at issue was not part of the school’s educational curriculum? Second, given that the students claim an entitlement to compensation for some, but not all, of the work they performed during the course of the vocational program, should it apply the primary-beneficiary test to only that targeted segment of the program at issue or to the educational program as a whole?
Erroneous test. The district court erred in using a new test under which a court would ask whether the activity in dispute was “‘well beyond the bounds of what could fairly be expected to be part of the internship’ or educational program.” Although the janitorial tasks assigned to the students were not part of the schools’ written curriculum, not required by the state regulations governing cosmetology education, and not directly supervised by instructors, other aspects of the relationship between the schools and its students led the appeals court to conclude that the janitorial work took place within the educational context, regardless of its ultimate educational benefit.
“Educational context.” The students were in the salons as part of the educational program, were assigned the disputed tasks by the same instructors who oversaw their practical training, received academic credit for the time spent on the tasks, and were told that they would be sent home—potentially delaying their graduation—if they failed to complete the assigned tasks. Accordingly, the appeals court concluded that the tasks arose from the students’ relationship with the schools.
Primary benefit test. The court next turned to consider whether the primary-beneficiary test applied in a case where students in a training or learning environment seek compensation for some, but not all, of the work they perform during the course of the educational relationship with the school? The Sixth Circuit concluded that when a plaintiff asserts an entitlement to compensation based only on a portion of the work performed in the course of an educational relationship, courts should apply the primary-beneficiary test laid out in Laurelbrook only to that part of the relationship, not to the broader relationship as a whole.
The appeals court did not hold that either party should prevail under the test it now directed the district court to apply, but rather remanded the matter to the district court to apply the primary-beneficiary test to the students’ motion for partial summary judgment.
Partial concurrence and partial dissent. In a separate opinion, Judge Batchelder concurred in the judgment to reverse the district court’s determination that the cosmetology students were not employees with respect to time spent cleaning, doing laundry, and restocking products in a hair salon operated by a cosmetology school. However, he took exception to majority’s rendition of Laurelbrook’s primary-beneficiary test. He argued that it directly conflicted with Eighth Circuit precedent and creates an unjustifiable split from sister circuits.
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