2nd Cir.: Court Adopts New Test for Determining Interns’ Status

By Lawrence Peikes and Christine Salmon Wachter Jul 31, 2015
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The 2nd U.S. Circuit Court of Appeals rejected the Department of Labor’s (DOL’s) six-part test for determining whether an intern working in the for-profit private sector is actually an employee and therefore entitled to the minimum wage and overtime pay under the Fair Labor Standards Act (FLSA). The court instead adopted a more flexible multifactor analysis.

Eric Glatt and Alexander Footman, two former unpaid production interns who worked on the movie “Black Swan,” sued Fox Searchlight Pictures, alleging that they had performed basic functions normally undertaken by paid employees, such as making copies, taking lunch orders and answering phones. Therefore, they argued, Fox violated the FLSA and New York Labor Law by failing to pay them at least the minimum wage.

The district court evaluated the plaintiffs’ claims by applying a six-factor test promulgated by the DOL in a fact sheet published in 2010. The factors were in turn taken from the U.S. Supreme Court’s 1947 decision in Walling v. Portland Terminal Co., 330 U.S. 148 (1947). In siding with the plaintiffs, the district court found that the benefits of the internships, like résumé building and job references, “were incidental to working in the office like any other employee and were not the result of internships intentionally structured to benefit them.” For an internship to be unpaid, the district court said, it should include some type of training designed to develop skills that are fungible in the industry and that go “beyond on-the-job training that employees receive.” The district court also granted class certification to a group of unpaid interns who had worked in multiple divisions of the Fox Entertainment Group. The certification grant inspired numerous copycat class actions brought by unpaid interns in the media and entertainment industries.

On appeal, the 2nd Circuit deemed the DOL’s test “too rigid for our precedent to withstand” and instead adopted a flexible “primary beneficiary” test that focuses on “whether the intern or the employer is the primary beneficiary of the relationship.” Thus, according to the 2nd Circuit, the proper inquiry is made up of the following “non-exhaustive set of considerations”:

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 course work or the receipt of academic credit.

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.

The 2nd Circuit emphasized that “[a]pplying these considerations requires weighing and balancing all of the circumstances” and that “[n]o one factor is dispositive and every factor need not point in the same direction for the court to conclude that the intern is not an employee entitled to the minimum wage.” Because the district courtapplied the discredited six-part test set out in the DOL’s intern fact sheet, the court of appeals vacated the decisions and remanded the cases to allow the lower courts an opportunity to assess the plaintiffs’ status under the new primary beneficiary test.

Glatt v. Fox Searchlight Pictures Inc., 2nd Cir., No. 13-4478-cv (July 2, 2015).

Professional Pointer: Employers should keep in mind the framework provided in Glatt when hiring interns. Using the 2nd Circuit’s seven factors as a guide, employers should make clear upfront and in writing the elements of the arrangement, including each intern’s duties and the opportunities for hands-on training that will be provided by the employer.

Lawrence Peikes and Christine Salmon Wachter are attorneys with Wiggin and Dana LLP in Stamford, Conn.

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