Last week, a Pennsylvania federal judge held that a former cosmetology school student was not entitled to minimum wage as an “employee” under the Fair Labor Standards Act or the Pennsylvania Wage Payment and Collection Law. Jochim v. Jean Madeline Educ. Ctr. of Cosmetology, Inc., 2015 U.S. Dist. LEXIS 45663 (E.D. Pa. Apr. 8, 2015).

In Jochim, plaintiff filed a lawsuit against Jean Madeline, an accredited cosmetology school, claiming that she should have been paid for work she performed in its clinic while she was enrolled there as a student. Because Pennsylvania state law mirrors the FLSA, the court utilized one analysis to determine whether, as a matter of law, plaintiff was an “employee” of Jean Madeline.

Examining the economic reality of the relationship between the former student and the cosmetology school, the court ultimately found that the “economic reality of the relationship was that Jochim paid the School tuition in exchange for an education in cosmetology, and a significant part of her education involved working in Jean Madeline’s clinic as a student.” In reaching this conclusion, the court found that students received instruction on how to improve and were not sent away from the clinic if they performed treatments poorly (as an employee would be). Further, instructors made assignments based on the number of clients in the waiting area and which students were present in the clinic at the time, regardless of particular skill or care (unlike an employee assigned based on proficiency).

Third, Jean Madeline provided the physical facilities and the necessary products required to practice treatments on clients; Plaintiff’s tuition included a fee for equipment, and Plaintiff could not opt out of this fee and buy her own equipment. Fourth, the only special skill required of plaintiff was completion of the hours of classroom training required by state law. Fifth, plaintiff had no guarantee of employment after graduation. Lastly, although the parties disputed whether the clinic operated at a profit or at a loss, the court found that, even accepting plaintiff’s assertion, “the entirety of the economic realities” weighed against finding an employment relationship even if the clinic were profitable in the aggregate. Plaintiff, like other students in education programs providing a clinical experience, was asked to perform increasingly difficult tasks, and her experience at the clinic was intended to provide her with the experience of working in a salon as a cosmetologist. Put simply, “the FLSA does not transform every training relationship into an employer-employee relationship.”

Business owners, in consultation with legal counsel, should analyze their relationship with all “trainees” to ensure compliance with federal and applicable state wage and hour laws.