Date: 12-20-2017

Case Style:

Case Number: 15-17147

Judge: Mary M. Schroeder

Court: United States Court of Appeals for the Ninth Circuit on appeal from the Northern District of California (San Francisco County)

Plaintiff's Attorney: Bryan Schwartz, Logan Talbot, Leon Greenberg and
Dana Sniegocki, Chaya Mandelbaum, Michelle Lee

Defendant's Attorney: Robert Lane Morris (argued), Soltman Levitt Flaherty & Wattles LLP, Thousand Oaks, California, for Defendants-Appellees.

Description: Plaintiffs are students of cosmetology and hair design at
schools in California and Nevada operated by defendant B&H
Education, Inc., under the name of Marinello Schools of
Beauty. Plaintiffs claim that they are employees within the
meaning of the Fair Labor Standards Act (“FLSA”), and
under California and Nevada state law, on the ground that
much of their time is spent in menial and unsupervised work,
and that they are therefore entitled to compensation. The
District Court granted summary judgment for B&H on the
FLSA claim, holding that under the test applicable to such
claims, the Plaintiffs, not the schools, are the primary
beneficiaries of their own labors because at the end of their
training they qualify to practice cosmetology. Moreover,
state law requires clinical training that includes maintenance
of a clean and sanitary work environment and does not
require that all client work be supervised. The District Court
BENJAMIN 4 V. B&H EDUCATION
also granted summary judgment for B&H on Plaintiffs’
claims under California and Nevada state law. We affirm.
Factual and Procedural Background
Marinello Schools of Beauty is a for-profit school that
offers discounted cosmetology services to the public through
salons staffed by vocational students who do not receive
compensation. Marinello is licensed to operate in California
and Nevada, and provides both classroom instruction and
clinical experience for students. Students must complete a
minimum number of instruction hours before participating in
the clinic and working on customers. See Cal. Code Regs.,
tit. 16, § 950.12; Nev. Rev. Stat. § 644.408.
Cosmetologists are required under California and Nevada
law to be individually licensed. Cal. Code Regs., tit. 16,
§ 976; Nev. Rev. Stat. § 644.190(2). State law requires that,
before applicants may take the licensing exam, they must take
part in hundreds of hours of classroom instruction, including
observing demonstrations, and practical training that includes
performing services on a person or mannequin. See Cal.
Code Regs., tit. 16, §§ 950.2, 928(a); Nev. Rev. Stat.
§§ 644.200, 644.204, 644.400(2). The state licensing exam
tests sanitation and cleaning knowledge as well as
cosmetology skills. Cal. Bus. & Prof. Code § 7338; Nev.
Rev. Stat. §§ 644.240, 644.244. Students at Marinello attend
lectures, review course materials, take tests, and practice
cosmetology on customers in the clinic under some instructor
supervision, thereby allowing them to earn academic credit
toward qualifying them to take the state licensing exam. In
the clinic, students not only practice cosmetology itself,
including hair, skin, and nail treatments, but perform selected
duties that include sanitizing their work stations, laundering
BENJAMIN V. B&H EDUCATION 5
linens, dispensing products, greeting customers, making
appointments, and selling products.
Plaintiffs in this case are Jacqueline Benjamin and Taiwo
Koyejo, cosmetology students at Marinello in California, and
Bryan Gonzalez, a hair design student at Marinello in
Nevada. In January 2015, Plaintiffs filed a Second Amended
Collective and Class Action Complaint in the District Court
for the Northern District of California. Plaintiffs claimed
that, rather than properly educate and train them in
cosmetology, B&H exploited the Plaintiffs for their unpaid
labor. B&H did this, Plaintiffs claimed, by not paying them
for their work in Marinello’s salons, by leaving them
unsupervised in the salon, and by requiring them to perform
services that they already could do as opposed to services that
they needed to learn for the licensing exams. Plaintiffs also
claimed B&H unlawfully kept the salon’s profits, Plaintiffs’
tuition fees, the money Plaintiffs spent when required to
purchase Marinello’s salon supplies to service paying
customers, as well as heavy fines that B&H imposed on
Plaintiffs for tardiness and absences during scheduled salon
shifts. Plaintiffs sought payment for minimum and overtime
wages, premium wages for missed meal and rest breaks, civil
penalties for violating wage laws, restitution of fines, and
reimbursement for supply purchases. Plaintiffs also
requested declaratory judgment that B&H’s practices violated
federal and state law.
Plaintiffs moved for summary judgment, asserting that the
students were employees under federal and state law. B&H
filed a cross-motion for summary judgment, contending the
Plaintiffs were students, not employees. In response to
B&H’s cross-motion for summary judgment and to support
the allegations of the complaint, Plaintiffs relied in part on
BENJAMIN 6 V. B&H EDUCATION
witness declarations from three individuals who Plaintiffs had
not disclosed to B&H pursuant to Federal Rule of Civil
Procedure 26. The District Court therefore ordered the
declarations stricken pursuant to Rule 37. The District Court
then granted B&H summary judgment and denied Plaintiffs’
motion for summary judgment. Applying the primary
beneficiary test set forth in Glatt v. Fox Searchlight Pictures,
Inc., 791 F.3d 376 (2d Cir. 2015), amended and superseded
by 811 F.3d 528 (2d Cir. 2016), and Schumann v. Collier
Anesthesia, P.A., 803 F.3d 1199 (11th Cir. 2015), the District
Court held that Plaintiffs were not employees under federal
or state law because Plaintiffs were the primary beneficiaries
of the educational program and they had not shown that
Marinello subordinated the educational function of its clinics
to its own profit-making purposes.
Plaintiffs appeal, challenging the District Court’s rulings
under both federal and state law, as well as the Rule 37
ruling.
Discussion
I. Federal law under the FLSA
The essence of Plaintiffs’ claim is that they should be
treated as employees rather than students. Therefore, our
analysis under federal law must begin with the distinction that
has developed between students, or interns, on the one hand
and employees on the other. The seminal case is Walling v.
Portland Terminal Co., 330 U.S. 148 (1947) (Portland
Terminal), involving trainees working alongside railroad
workers, and it has remained the guiding source of the
principles governing cases involving claims of both trainees
and students seeking to be treated as employees.
BENJAMIN V. B&H EDUCATION 7
In Portland Terminal, the Supreme Court had to interpret
bare bones provisions of the FLSA to determine whether
railroad trainees were employees. 330 U.S. at 152–53. The
FLSA defines an employee to be “any individual employed
by an employer”; it defines “employ” as “to suffer or permit
to work.” 29 U.S.C. § 203(e)(1), (g). The United States
Department of Labor (“DOL”) sought an injunction against
a railroad for failing to pay its trainees minimum wages under
the FLSA. Because the trainees were performing work for
the railroad, DOL contended they were required to be paid by
the railroad as employees. See Portland Terminal, 330 U.S.
at 149. The railroad responded that it was providing training
that benefitted the trainees, because the training they were
receiving would qualify them to serve and be compensated as
employees. Id. at 149–50. After reviewing the factors it
deemed relevant, the Court ruled in favor of the railroad. Id.
at 153. It reasoned that the trainees, not the railroad, were the
direct beneficiaries of the system and were therefore not
employees of the railroad. Id.
A number of important factors contributed to that
conclusion. The railroad provided a week-long practical
training course to the trainees, who were all prospective yard
brakemen. Id. at 149–50. At the completion of the training,
the railroad certified the trainees as qualified to be railroad
employees. Id. at 150. The trainees did not displace regular
employees, and the trainees’ work sometimes impeded the
railroad’s business. Id. at 149–50. The railroad’s supervisors
often oversaw the trainees’ work, and the trainees never
expected any remuneration for the training period. Id. at 150.
Once certified, the trainees’ names were placed on a list of
qualified workers from which the railroad could draw for paid
work when needed. Id. In short, the trainees derived a major
benefit by becoming qualified to do paid work, where the
BENJAMIN 8 V. B&H EDUCATION
railroad bore some burden and inconvenience in the short run.
In finding that the trainees were not employees under the
FLSA, the Court observed that “the railroads receive no
‘immediate advantage’ from any work done by the trainees
. . . .” Id. at 153. The Court held the trainees were not
employees. Id.
It is important for our purposes that in so holding, the
Court expressly compared the trainees to students in an
educational setting, emphasizing that students are not
employees. The Court noted that the FLSA’s definition
cannot be read so broadly as to include all students as
“employees of the school or college they attend” and that had
the “trainees taken courses in railroading in a public or
private vocational school, wholly disassociated from the
railroad, it could not reasonably be suggested that they were
employees of the school within the meaning of the [FLSA].”
Id. at 152–53.
Since Portland Terminal, the Supreme Court has, in a
handful of cases outside the educational context, further
refined the employment relationship test under the FLSA,
finding that the “test of employment under the [FLSA] is one
of ‘economic reality.’” Tony & Susan Alamo Found. v. Sec’y
of Labor, 471 U.S. 290, 301 (1985) (quoting Goldberg v.
Whitaker House Coop., Inc., 366 U.S. 28, 33 (1961) (holding
that the test of employment under the FLSA is the economic
reality test)) (Alamo); accord Rutherford Food Corp. v.
McComb, 331 U.S. 722, 730 (1947) (noting that whether an
individual is an employee under the FLSA depends not on
“isolated factors but rather upon the circumstances of the
whole activity”).
BENJAMIN V. B&H EDUCATION 9
In Alamo, the Supreme Court’s most recent discussion of
the economic realities test in the employment context, the
DOL sued a non-profit religious foundation for violating the
minimum, overtime, and record-keeping provisions of the
FLSA. 471 U.S. at 291–92. The religious foundation ran
several commercial businesses, including service stations,
clothing and grocery stores, hog farms, a motel, construction
companies, candy companies, and record-keeping companies.
Id. at 292. Staffing the foundation’s businesses were
“volunteers,” who were former drug addicts, derelicts, or
criminals that the foundation had converted and rehabilitated.
Id. In exchange for their services, the volunteers received
food, clothing, shelter, and other benefits from the
foundation, but no cash salaries. Id. The Court held that the
“volunteers” were actually employees under the economic
realities test. Id. at 301, 306. Two factors were particularly
significant. First, the volunteers were entirely dependent
economically upon the foundation for long periods of time,
and in some cases several years. Id. at 301. Second, the
volunteers expected to receive in-kind non-cash benefits in
exchange for their services, which amounted to “wages in
another form.” Id. Because the volunteers “work[ed] in
contemplation of compensation,” they were employees under
the FLSA. Id. at 306. The Court looked to the economic
reality of the situation and held it involved work for
compensation and hence employment.
While our Court has not previously addressed a situation
involving interns or vocational students under the FLSA, we
have followed Alamo and Portland Terminal by applying a
four-part economic reality test looking to the totality of the
circumstances when determining whether individuals are
employees under the FLSA. We have considered situations
involving prison inmates and homeless persons in
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rehabilitation programs. See Hale v. Arizona, 993 F.2d 1387,
1389 (9th Cir. 1993) (en banc); see also Williams v.
Strickland, 87 F.3d 1064, 1065 (9th Cir. 1996). In such
cases, we looked to the overall economic realities of the
relationship: “whether the alleged employer has the power to
hire and fire the employees, supervises and controls employee
work schedules or conditions of employment, determines the
rate and method of payment, and maintains employment
records.” Hale, 993 F.2d at 1394 (citing Bonnette v. Cal.
Health & Welfare Agency, 704 F.2d 1465, 1470 (9th Cir.
1983)). We held that neither the prison inmates nor the
rehabilitation participants were employees. Id. at 1395;
Strickland, 87 F.3d at 1067. This is because there was no
bargained-for compensation relationship in either case. The
prisoners worked because they had to work. Hale, 993 F.2d
at 1394. And the rehabilitation participants had no
expectation of compensation other than treatment.
Strickland, 87 F.3d at 1067.
The DOL, the agency that administers and enforces the
FLSA, has struggled with formulating the appropriate test or
guidelines to apply in dealing with issues relating to
interns/employees. On the basis of Portland Terminal, the
DOL issued informal guidance in 2010 as to whether unpaid
interns are employees under the FLSA. See Wage & Hour
Div., U.S. Dep’t of Labor, Fact Sheet #71: Internship
Programs Under The Fair Labor Standards Act (Apr. 2010),
https://www.dol.gov/whd/regs/compliance/whdfs71.pdf.
Under the DOL’s six-factor test, an intern is an employee
unless all of the following factors are met:
1. The internship, even though it includes
actual operation of the facilities of the
BENJAMIN V. B&H EDUCATION 11
employer, is similar to training which would
be given in an educational environment;
2. The internship experience is for the benefit
of the intern;
3. The intern does not displace regular
employees, but works under close supervision
of existing staff;
4. The employer that provides the training
derives no immediate advantage from the
activities of the intern; and on occasion its
operations may actually be impeded;
5. The intern is not necessarily entitled to a
job at the conclusion of the internship; and
6. The employer and the intern understand
that the intern is not entitled to wages for the
time spent in the internship.
Id.
The leading recent Court of Appeals decision to consider
the DOL test however, rejected it as “too rigid” and too
dependent on the particular facts of Portland Terminal.
Glatt, 811 F.3d at 536. The court in Glatt also rejected the
plaintiffs’ main argument, one that essentially turned
Portland Terminal on its head. Portland Terminal had said
that because “the railroads receive no ‘immediate advantage’
from any work done by the trainees, we hold that they are not
employees within the [FLSA’s] meaning.” 330 U.S. at 153.
The plaintiffs in Glatt, however, argued that if the employers
BENJAMIN 12 V. B&H EDUCATION
received any economic benefit, the plaintiffs were employees.
811 F.3d at 535. The Second Circuit ruled such a position
was not consistent with Portland Terminal. Id. at 537.
The Second Circuit in Glatt vacated the district court’s
order, that had adopted the DOL test, in favor of a different
test. Id. at 538. The appellate court held that the appropriate
test for determining whether interns should receive
compensation under the FLSA and New York labor law
should be what it termed the “primary beneficiary test.” Id.
at 536. The Second Circuit’s opinion set forth a list of seven
non-exhaustive factors for courts to weigh and balance under
the test. Id. at 536–37. The factors are:
1. The extent to which the intern and the
employer clearly understand that there is no
expectation of compensation. Any promise of
compensation, express or implied, suggests
that the intern is an employee—and vice
versa.
2. The extent to which the internship provides
training that would be similar to that which
would be given in an educational
environment, including the clinical and other
hands-on training provided by educational
institutions.
3. The extent to which the internship is tied to
the intern’s formal education program by
integrated coursework or the receipt of
academic credit.
BENJAMIN V. B&H EDUCATION 13
4. The extent to which the internship
accommodates the intern’s academic
commitments by corresponding to the
academic calendar.
5. The extent to which the internship’s
duration is limited to the period in which the
internship provides the intern with beneficial
learning.
6. The extent to which the intern’s work
complements, rather than displaces, the work
of paid employees while providing significant
educational benefits to the intern.
7. The extent to which the intern and the
employer understand that the internship is
conducted without entitlement to a paid job at
the conclusion of the internship.
Id.
The Second Circuit explained it chose the primary
beneficiary test due to the test’s three important features. Id.
at 536. First, the test “focuses on what the intern receives in
exchange for his [or her] work,” which incorporates Portland
Terminal’s focus on the interest of trainees. Id. Second, the
test allows courts flexibility in examining the economic
reality between the intern and the employer, which follows
the Supreme Court’s economic reality test cases. Id. And
third, the test acknowledges the distinction between internemployer
relationships, in which interns typically expect to
receive educational or vocational benefits, and employeeBENJAMIN
14 V. B&H EDUCATION
employer relationships, in which employees do not
necessarily expect to receive such benefits. Id.
Other courts have adopted either Glatt’s primary
beneficiary test or have established a similar test in cases
involving interns or trainees. See Schumann, 803 F.3d at
1211–12 (expressly adopting the Glatt primary beneficiary
test); Solis v. Laurelbrook Sanitarium & Sch., Inc., 642 F.3d
518, 529 (6th Cir. 2011) (discussing relevant factors for
courts to consider when analyzing “which party derives the
primary benefit from the relationship”) (Laurelbrook).
The cases have arisen in a variety of contexts. In Glatt,
the plaintiffs were unpaid interns working for a film
production company, and the interns argued that they were
owed compensation as employees under the FLSA and New
York labor law. 811 F.3d at 531–33. During their
internships, one plaintiff was enrolled in a degree program,
and the other two plaintiffs were not. Id. at 532–33. After
adopting the primary beneficiary test, the Second Circuit
remanded the case for the district court to apply it. Id. at 538.
In Schumann, nursing students sought wages under the
FLSA for work performed in the school’s clinic, which was
a prerequisite to obtaining a master’s degree in the students’
program. 803 F.3d at 1202. The Eleventh Circuit adopted
Glatt’s primary beneficiary test and remanded the case to the
district court to determine whether the students were
employees based on the test. Id. at 1211–13.
In Laurelbrook, the DOL had sought an injunction against
a religious school for allegedly violating the FLSA, arguing
that students who were engaged in practical, vocational
training to learn various trades and serve sanitarium patients,
BENJAMIN V. B&H EDUCATION 15
were employees. 642 F.3d at 519–21. The Sixth Circuit
upheld the district court’s conclusion that the students were
not employees, noting that the school benefitted from
receiving payment for students’ services, and that the hours
students worked allowed the sanitarium to satisfy its licensing
requirements, but that the students, not the school, were the
primary beneficiaries. Id. at 530–32. The benefits to the
school were offset by the burdens, because students did not
reduce the number of compensated workers, and instructors
had to spend extra time supervising students at the expense of
performing productive work. Id. at 530–31. The students, on
the other hand, received the important benefits of gaining
hands-on, practical training that allowed them to be
competitive in a variety of vocations upon graduation, to
learn how to operate tools used in the trades they were
studying, to earn credit for courses approved by the state
accrediting agency, and to develop a strong work ethic and
leadership skills. Id. at 531. Therefore, the Sixth Circuit
concluded the students were the primary beneficiaries and
hence were not employees.
The primary beneficiary analysis by our sister circuits in
Glatt, Schumann, and Laurelbrook represent applications of
the Supreme Court’s economic realities test, and the courts
evaluated the totality of the circumstances of each case as the
Supreme Court has directed. See Rutherford Food Corp.,
331 U.S. at 730; Schumann, 803 F.3d at 1210; Glatt, 811 F.3d
at 536; Laurelbrook, 642 F.3d at 522. Glatt in particular
provides a helpful list of factors for courts to consider in the
specific context of student workers. We agree with those
decisions that the primary beneficiary test best captures the
Supreme Court’s economic realities test in the
student/employee context and that it is therefore the most
BENJAMIN 16 V. B&H EDUCATION
appropriate test for deciding whether students should be
regarded as employees under the FLSA.
II. Applying the primary beneficiary test
The primary beneficiary test as articulated in Glatt
includes at least seven factors. Applying them to the facts of
this case, most if not all militate toward concluding that
Plaintiffs are students. With respect to the first, there is no
dispute that Marinello students signed on knowing they
would not receive remuneration and did not expect
compensation. Under the second and third factors, Marinello
students received hands-on training in the clinic and academic
credit for the hours they worked. The students’ clinical work
corresponded to their academic commitments under the
fourth factor because clinical work allowed students to clock
the hours they needed to sit for the state licensing exams. See
Cal. Code Regs., tit. 16, §§ 950.2, 928(a); Nev. Rev. Stat.
§§ 644.200, 644.204, 644.400. Fifth, nothing in the record
suggests that Marinello required its students to participate in
their programs for longer than was necessary to complete
their hour requirement for the state exams. Under the sixth
factor, students did not routinely displace the work of paid
employees as the school maintained staff to instruct students,
run clinics, operate front desks, inventory and stock the
dispensary, handle the logistical needs of the clinics, and
perform nighttime janitorial services. Finally, students had
no expectation of employment with Marinello upon
graduation. In summary, application of the Glatt factors
establishes that students were the primary beneficiaries of
their labors. Their participation in Marinello’s clinic
provided them with the hands-on training they needed to sit
for the state licensing exams. Applying the primary
BENJAMIN V. B&H EDUCATION 17
beneficiary test we must conclude they were not employees
under the FLSA.
Plaintiffs nevertheless urge us to apply the DOL test in
determining the employment relationship in this case. We
agree with the Second Circuit in Glatt, however, that the
DOL’s test is not appropriately utilized as a test applicable to
a variety of circumstances, as it is so closely tied to the facts
in Portland Terminal. As the Second Circuit said, the DOL’s
test “is essentially a distillation of the facts discussed in
Portland Terminal,” Glatt, 811 F.3d at 536, and thus “too
rigid” to comport to our case law, which applies a totality of
the circumstances approach to determining the employment
relationship under the FLSA. See, e.g., Hale, 993 F.2d at
1394.
Even if we were to apply the DOL test, however, it would
not in all likelihood materially change the result in this case.
Applying the DOL criteria in this case, we view the training
provided to Plaintiffs to be in an educational environment,
because state law requires students to clock hundreds of hours
of instruction and practical training in order to qualify for
taking the licensing exams. Students benefit because the
students learn skills tested on the licensing exams and are
able to sit for the exams. Students do not displace regular
employees, they are not entitled to a job at the end of their
clinical experience, and they have understood they would not
receive compensation. Under the DOL test as applied to the
facts before us, we would similarly conclude Plaintiffs are not
employees.
BENJAMIN 18 V. B&H EDUCATION
III. State law claims
The Plaintiffs argue that even if they are not employees
under the FLSA, they should be paid under Nevada and
California law. With respect to Nevada, however, the parties
agree that the test for determining whether an employment
relationship exists is the same as it is under the FLSA. See
Terry v. Sapphire Gentlemen’s Club, 336 P.3d 951, 957 (Nev.
2014). We therefore apply the primary beneficiary test to the
Nevada law claims as well, and the students’ claim under
Nevada law fails for the same reasons that the FLSA claim
fails.
California law is a little different, since California courts
have distinguished California’s wage law from the FLSA
with respect to the definition of employment. See Martinez
v. Combs, 231 P.3d 259, 274 (Cal. 2010). “Employees” are
entitled to recover unpaid minimum and overtime wages
pursuant to California Labor Code § 1194 under the terms of
the applicable wage order that is issued by the Industrial
Welfare Commission (“IWC”), the body in charge of
regulating California’s minimum wage laws, id. at 271, and
to which the California Supreme Court defers, id. at 275. The
IWC wage orders include a definition of employer as one
who “employs or exercises control over the wages, hours, or
working conditions of any person.” Id. at 274 (quoting Cal.
Code Regs., tit. 8, § 11140(2)(G)).
Plaintiffs rely on Martinez and its deference to the IWC
to argue that they must be employees subject to a wage order.
But Martinez does not help them. In Martinez, the California
Supreme Court held that produce merchants were not liable
to seasonal agricultural workers for minimum wages under
§ 1194. Id. at 282–87. The workers had harvested
BENJAMIN V. B&H EDUCATION 19
strawberries for a farm operator who then sold the
strawberries to the merchants. Id. at 262–63. The workers
sought compensation from the merchants because the farm
operator who hired the workers went bankrupt. Id. at 263. In
reaching its holding, the court defined the employment
relationship under § 1194 by looking to the applicable wage
order. Id. at 278. The California Supreme Court held the
merchants were not the workers’ employer, which required
control over hours and working conditions. Id. at 285–87.
The farm operator was the employer.
Plaintiffs contend that under this definition they are
employees because Marinello controls what they do. See id.
at 278. The control test, however, does not assist us in the
educational context, where the school is in charge. As the
District Court noted in this case, schools typically exercise
significant control over their students, but that does not make
them employers. Moreover, none of the California cases
cited by Plaintiffs involve an educational context. All
involved employees claiming they were being paid less than
minimum wages. See Torres v. Air to Ground Servs., Inc.,
300 F.R.D. 386, 391, 391 (C.D. Cal. 2014) (plaintiffs were
paid by Air to Ground Services to clean FedEx planes);
Betancourt v. Advantage Human Resourcing, Inc., No. 14-cv-
01788-JST, 2014 WL 4365074, at *1 (N.D. Cal. Sept. 3,
2014) (plaintiff was hired by a temporary staffing agency);
Arredondo v. Delano Farms Co., 922 F. Supp. 2d 1071,
1073–74 (E.D. Cal. 2013) (plaintiffs worked for farm labor
contractors plaintiffs claimed violated wage and hour laws);
McDonald v. Ricardo’s on the Beach, Inc., No. CV 11-9366
PSG (MRWx), 2013 WL 153860, at *1 (C.D. Cal. Jan. 15,
2013) (plaintiff was a paid hourly employee at two family
restaurants he claimed were violating wage law); Rodriguez
v. SGLC, Inc., No. 2:08-cv-01971-MCE-KJN, 2012 WL
BENJAMIN 20 V. B&H EDUCATION
5704403, at *1–2 (E.D. Cal. Nov. 15, 2012) (plaintiffs were
paid Mexican farm laborers admitted to work in the United
States under temporary visas, and they sued their two
employers for failure to pay sufficient wages); Gonzalez v.
Millard Mall Servs., Inc., No. 09cv2076-AJB(WVG), 2012
WL 727867, at *1 (S.D. Cal. Mar. 6, 2012) (plaintiffs were
janitors claiming they were employees of two affiliated
companies); Castaneda v. Ensign Grp., Inc., 177 Cal. Rptr.
3d 581, 582 (Cal. Ct. App. 2014) (plaintiff was employee of
nursing facility suing the facility’s corporate owner for
unpaid minimum and overtime wages); Guerrero v. Superior
Court, 153 Cal. Rptr. 3d 315, 319 (Cal. Ct. App. 2013)
(plaintiff paid to provide in-home support services sued
employers for wage and hour law violations).
In this case, the California Supreme Court would have no
reason to look to the wage order definition of employer to
determine whether these plaintiffs are students or employees.
The test it establishes for employment is one of “control” that
cannot be usefully applied to a school. As we have seen, the
test is frequently applied to determine which entity is liable
to an employee for minimum wages. A typical plaintiff is an
employee seeking a deeper pocket. See, e.g., Martinez,
supra; Castaneda, supra. Here, Plaintiffs were never hired
by any entity as an employee. They are not entitled to be paid
any wages.
We further conclude that the California Supreme Court
would not apply the DOL factors that the federal courts have
rejected as too rigid, but would instead apply a test more
similar to the FLSA primary beneficiary test. This is because
such a test is better adapted to an occupational training setting
than the DOL factors. See Schumann, 803 F.3d at 1209,
1211–12; Glatt, 811 F.3d at 536–37; Laurelbrook, 642 F.3d
BENJAMIN V. B&H EDUCATION 21
at 528–29. Plaintiffs’ California state law claim thus fails for
the same reasons as the federal law claim fails.
We recognize that Plaintiffs are doubtless unhappy with
the quality of the education they received. The appropriate
remedy, however, is not for courts to order students to be paid
as employees. The state boards in Nevada and California
provide their own mechanisms for disciplining schools for
unsatisfactory performance. In California, for instance, the
State Board of Barbering and Cosmetology may revoke,
suspend, or deny approval of a school for repeated failure to
comply with the Board’s regulations. See Cal. Bus. & Prof.
Code § 7362(c)(3). Similarly, in Nevada, the State Board of
Cosmetology may take disciplinary action against a school of
cosmetology for failure to comply with the Board’s
requirements and regulations. See Nev. Rev. Stat.
§ 644.430(1)(a), (2). There may also be remedies under state
tort or contract law for recovery of improper fees, tuition, or
penalties paid to the schools. Our Court’s role in this appeal
is only to determine under applicable federal or state law
whether Plaintiffs are employees, and they are not.
IV. Federal Rule of Civil Procedure 37
The final matter we must address is a discovery dispute.
Plaintiffs offered three declarations to support their motion
for summary judgment, but they came from witnesses who
had not been listed as witnesses pursuant to Rule 26. The
court struck the declarations as a sanction under Rule
37(c)(1). The District Court’s order was not an abuse of
discretion. See Yeti by Molly, Ltd. v. Deckers Outdoor Corp.,
259 F.3d 1101, 1105–06 (9th Cir. 2001) (reviewing the
imposition of a Rule 37 discovery sanction for abuse of
discretion).
BENJAMIN 22 V. B&H EDUCATION
Plaintiffs argue that they identified one of the witnesses
in an interrogatory response’s catchall reference to “other
current and former Student-Employees of Marinello,” but this
does not satisfy the requirements for a Rule 26 disclosure.
See Fed. R. Civ. P. 26(a)(1)(A)(i) (requiring parties to
disclose “the name and, if known, the address and telephone
number of each individual likely to have discoverable
information—along with the subjects of that
information—that the disclosing party may use to support its
claims or defenses, unless the use would be solely for
impeachment”). For the other two witnesses, Plaintiffs
argued that they mentioned the witness names in an
interrogatory response, but this was also insufficient. See
Lujan v. Cabana Mgmt., Inc., 284 F.R.D. 50, 72–73
(E.D.N.Y. 2012) (collecting cases holding that mentioning a
witness’ name in an interrogatory response is insufficient for
Rule 26 purposes).
Plaintiffs have not shown that their failure to disclose was
substantially justified or harmless, as required under Rule
37(c)(1), when they waited until the motion for summary
judgment stage to identify likely witnesses. Luke v. Family
Care & Urgent Med. Clinics, 323 F. App’x 496, 498–99 (9th
Cir. 2009); Yeti by Molly, Ltd., 259 F.3d at 1105–07; see also
Medina v. Multaler, Inc., 547 F. Supp. 2d 1099, 1105 n.8
(C.D. Cal. 2007) (“[F]ailure to disclose . . . a likely witness
before defendants’ summary judgment motion was filed
prejudiced defendants by depriving them of an opportunity to
depose him.”). There was no error in the District Court’s
refusal to consider the declarations.
Finally, however, even if the stricken witness declarations
had been considered, they would in all likelihood have made
no material difference to the District Court’s ruling on the
BENJAMIN V. B&H EDUCATION 23
summary judgment motions. 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.

Outcome: The District Court correctly determined that the Plaintiffs
were not employees of the schools in which they enrolled for
training as cosmetologists. Plaintiffs are not entitled to
recover wages, the only relief they seek here. Further, the
District Court did not err in its handling of discovery issues.
Its judgment must therefore be affirmed.

AFFIRMED.

Plaintiff's Experts:

Defendant's Experts:

Comments: