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U.S. Court of Appeals: Students not entitled to wages for work hours required for licensure

The U.S. Court of Appeals for the 2nd Circuit held February 5 that cosmetology students working at a salon accepting paying customers, but operated by their cosmetology school, are not entitled to be paid for that work if the school is not requiring them to work more than necessary to acquire the hours needed for licensure.

(Velarde vs. GW GJ).

In 2011, Patrick Velarde enrolled in the Salon Professional Academy of Buffalo, a for-profit cosmetology school, where he took classes and worked in the school’s student salon. There, he served paying customers, cleaned, and performed bookkeeping duties, but did not receive financial compensation. New York cosmetology law requires license applicants to have 1,000 hours of coursework, and Velarde spent a large majority of the 1,000 hours he worked in the salon—34 hours a week for 22 weeks—without pay, while paying the school $13,000 in tuition.

In 2014, after completing his program and receiving a state license, Velarde sued the Academy for unpaid wages, alleging that the school had violated labor laws by not paying him for his work in its salon. After a trial court ruled in favor of the school, Velarde appealed, and the case went up to the Second Circuit, which affirmed the lower court.

The judges of the Second Circuit analyzed Velarde’s case through the lens of a 2015 Supreme Court decision dealing with unpaid interns at for-profit enterprises. In the decision, Glatt v. Fox Searchlight Pictures, the Court held that, if a for-profit enterprise was the primary beneficiary of a relationship between itself and an unpaid intern, than the intern is, in fact, an employee of the company and entitled to paid compensation, but if the intern is the primary beneficiary of the relationship, then that intern is not entitled to compensation.

Velarde, objecting to the circuit court’s framing of the case, argued that considerations of who the primary beneficiary of his relationship with the Academy were irrelevant to his case. He was not an “intern,” as the worker in Glatt had been, and, regardless of whether he benefited from his time in the Academy’s salons, the Academy received financial benefit from the work he performed. Velarde argued that the experience and credit hours he gained from his work at the school were not sufficient reason for him to work unpaid for the school’s profit.

The judges disagreed, choosing to extend Glatt’s intern-based holding to determining the distinction between employees and students. “As with interns,” wrote Judge Susan Carney, “disentangling the threads of a complex economic fabric and teasing out the respective benefits garnered by students and their commercial training programs is key to determining whether, for [Fair Labor Standards Act] purposes, a trainee is serving primarily as an employee of that school or training program–or is primarily a student.”

One of the key factors in the court’s determination of that, wrote Judge Carney, was the fact that the Academy did not run “a training program whose duration far exceeds the period in which the program provides the student with beneficial learning.” The school had seemingly not required Velarde to work more than was necessary to fulfill his 1,000-hour requirement for licensure.

“We find it meaningful that the Academy required that Velarde complete not more than, but exactly the number of hours required by the state of New York to qualify for licensure . . . the bulk of it providing services in the Salon . . . under the supervision of the Academy’s instructors.”

Although Velarde argued that his inability during his salon hours to choose in which areas of practice to work, and the Academy’s requirement that he perform janitorial and bookkeeping services for the salon, indicated that he was not just a student while in the salon, Judge Carney disagreed. Practical vocational skill training may require menial work, she wrote, noting “that a vocational school does not provide the optimal learning experience for a student does not necessarily transform it into the primary beneficiary of the relationship.”

“Furthermore,” the judge wrote, “although Velarde faults the Academy for charging customers fees for his cosmetological services that exceeded the Academy’s relevant operating costs . . . the Academy has no obligation not to turn a reasonable profit on its operations.” Further, although Velarde provided “tangible benefits” to the Academy, the court held that he had not replaced the work of paid employees.

“This is not a case in which a business uses the facade of a vocational school to deceive students into working unexpectedly long hours without compensation, replacing the labor of its paid employees, or working hours well beyond long-standing state requirements.”