For the Marinello Schools of Beauty, an adverse court decision would have required a complete make-over of the business plan.
Students had sued the cosmetology school, alleging they were treated like employees and were owed money for cleaning up salons and other menial tasks. The school answered that they were students fulfilling educational requirements.
In Benjamin v. B&H Education, Inc., the courts said the schools were just doing business as usual. For now, students will get the haircut when working for cosmetology licenses.
Marinello is a for-profit school that offers discounted cosmetology services to the public through salons staffed by vocational students. They are not paid for their work, but receive clinical credits.
In California, cosmetologists must be individually licensed. But before taking the exam, students must complete hundreds of hours of classroom instruction and practical training.
In addition to testing cosmetology skills, the exam tests sanitation and cleaning knowledge. So Marinello put students to work. Some complained to the government it was a scam; others filed suit.
The plaintiffs complained about menial labor, including sanitizing work stations and laundering linens. In their lawsuit, they said the school was exploiting them for free labor.
In a cross-motion for summary judgment, the school said the plaintiffs were students -- not employees. A trial judge ruled in favor of the school, finding the students were not employees because they were the primary beneficiaries of the educational program.
On appeal, the Ninth Circuit affirmed. The appeals court said that, under the "economic reality" test, students were not employees even though they spent much of their time doing menial work.
At the end of the day, the panel reasoned, the students were qualified to practice cosmetology because of that training. The judges acknowledged that the students were "doubtless unhappy" with the quality of education.
"The appropriate remedy, however, is not for courts to order students to be paid as employees," the jurists said.