The three-judge panel ruled against the plaintiffs in the case involving B&H Education. | File photo

The 9th Circuit Court of Appeals has affirmed a district court's ruling that three cosmetology students are not considered employees under the Fair Labor Standards Act (FLSA).

Circuit Judges Mary Schroeder and Richard Tallman and District Judge Robert Whaley, sitting by designation, denied Jacqueline Benjamin, Bryan Gonzalez and Taiwo Koyejo's appeal in their case involving B&H Education, ruling the lower court did not err in handling discovery issues based on an economic reality test and primary beneficiary analysis.

As students of California- and Nevada-based B&H Education, also known as Marinello Schools of Beauty, plaintiffs alleged they were made to perform menial work that was not part of the certification process, and that based on three separate witness statements they were owed dues under the Nevada or California law. 

The plaintiffs alleged while attending mandated lectures; practicing cosmetology on clinic customers, which included greeting customers, making appointments and selling products; and testing for certification in 2015, they were exploited and required to perform services they did not need to achieve to attain their licensing exams.

Arguing for declaratory judgement based on B&H violating both federal and state law, plaintiffs sought recompense for minimum, overtime and premium wages, civil penalties, restitution of fines and reimbursement for product supply. To back up their argument, plaintiffs relied in part on Benjamin v. B&H Education witness declarations from three individuals, whom “Plaintiffs had not disclosed to B&H pursuant to Federal Rule of Civil Procedure 26,” according to the appeal authored by Schroeder.

Schroeder, who authored the opinion, cited Walling v. Portland Terminal Co., a 1947 case of trainees who worked together with railroad staffers to train for the similar position.

“It has remained the guiding source of the principles governing cases involving claims of both trainees and students seeking to be treated as employees,” Schroeder wrote in the appeal. “It reasoned that the trainees, not the railroad, were the direct beneficiaries of the system and were therefore not employees of the railroad.”

Schroeder detailed how based on the FLSA employment relationship and Department of Labor (DOL) “economic reality” test, certain criteria must be concluded during an internship. The test includes the internship is the considered educational training; the residency experience benefits the intern; the student never replaces regular employees, rather works under close supervision; the employer understands on occasion operations may be impeded due to training an intern; no job is promised after training is complete; and lastly both the intern and employer agree no wages are offered for training.

“Even if we were to apply the DOL test, however, it would not in all likelihood materially change the result in this case,” Schroeder wrote in the appeal, adding the three plaintiffs were required to clock hundreds of hours by state law to attain a cosmetology certification. After deciding no dues were mandated by state law, the panel of appeal judges considered the discovery dispute, which included three witnesses, who pursuant to Rule 26, were not listed as witnessed. 

Citing Yeti by Molly Ltd., v. Deckers Outdoor Corp. 2001, “the information contained in the witness declarations added little more than colorful illustration to the allegations of the complaint that were inadequate as a matter of law to make out an employment relationship,” Schroeder wrote in the appeal.

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