Second Circuit Court of Appeals Holds That Cosmetology Students at a For-Profit Cosmetology Training School Were Not Employees Under the Fair Labor Standards Act or New York Labor Law

February 27, 2019

By: Samuel G. Dobre

On February 5, 2019, the Second Circuit Court of Appeals held that students at a for-profit cosmetology school who provided cosmetology services to the general public at the school's salon as part of the requirements to qualify for taking the New York cosmetology licensing exam were not employees who were entitled to compensation under the Fair Labor Standards Act or the New York Labor Law. In Velarde v. GW GJ, Inc., the Court applied the "primary beneficiary" test established in its previous decision in Glatt v. Fox Searchlight Pictures, and concluded that the students were the primary beneficiaries of the relationship because the practical experience they gained at the salon was a necessary prerequisite to becoming licensed cosmetologists.

Three years after completing the vocational program at The Salon Professional Academy of Buffalo (which operates as GW GJ, Inc.), the plaintiff, Patrick Velarde, filed a class action lawsuit alleging that he and his fellow cosmetology students were entitled to compensation for the services they provided to the public at the school's salon. According to Velarde's complaint, he received eight weeks of classroom instruction, and then worked on an unpaid basis for 34 hours per week for 22 weeks at the school's salon under the supervision of licensed practitioners. New York law requires individuals to complete 1,000 hours of coursework in specific practical areas in order to qualify for the cosmetology license examination. The hours spent by Velarde and other students working at the school's salon was part of their 1,000 hours of coursework.

The Court found a few facts to be significant in determining that the students were the primary beneficiaries of the relationship: (1) the classroom instruction time plus the time spent in the salon added up to exactly 1,000 hours, which demonstrated that the students worked only the minimum amount of time at the salon to qualify for the examination; (2) students were supervised by the school's instructors while performing services at the salon; and (3) the hands-on experience in the salon was critical to prepare students for the written and practical components of the examination.

The Court was not bothered by the fact that the school charged fees to the public for the services of its students to supplement its revenue earned from the tuition charged to the students. In fact, the Court found that the fees charged were less than the fees charged for similar services provided by licensed cosmetologists at other salons in the area, which seemed to confirm the Court's view that the school was not the primary beneficiary of the relationship. The Court also was not bothered by Velarde's allegation that students were sometimes asked to do janitorial or clerical tasks in the salon that were of no instructional benefit to them. The Court stated that the performance of some repetitive or menial tasks was still part of the students' educational experience in gaining familiarity with the industry, and the mere fact that these tasks might have been performed sometimes did not transform the school into the primary beneficiary of the relationship.

The Second Circuit's decision is certainly a positive development for providers of vocational programs. It would be prudent for such programs to make clear during the application and enrollment process that students will not be deemed to be employees with respect to any services they provide that are part of their licensing or educational requirements, and that such services are not compensable.