In Glatt, et al. v. Fox Searchlight Pictures, Inc. and Fox Entertainment Group, Inc., the Plaintiffs were unpaid interns who alleged the Defendants violated the minimum wage and overtime provisions of the Fair Labor Standards Act (FLSA) and comparable New York state law by failing to pay the interns as employees. The District Court granted the partial summary judgment motion of Plaintiffs Eric Glatt and Alexander Footman and found they were improperly classified as unpaid interns rather than employees. The District Court also granted Plaintiff Eden Antaliks motion to conditionally certify an FLSA nationwide collective brought on behalf of unpaid interns working for the Defendants and granted his motion to certify a New York class for his state law claims.
In reaching its conclusions, the District Court utilized the Department of Labors (DOL) version of a six factor test. Under the DOL six factor test, an individual is an employee for purposes of the FLSA unless all of the following factors apply: (1) the internship, even though it includes actual operation of the facilities of the 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. The District Court, unlike the DOL, balanced the six factors in finding Glatt and Footman were employees rather than requiring that all six factors apply to establish that the intern is not an employee.
However, in reversing the findings of the District Court and remanding the case for further analysis of the issues involved, the Court of Appeals for the 2nd Circuit indicated that DOL six factor test is too rigid and declined to defer to the test. The 2nd Circuit found that the more flexible primary beneficiary test should be applied to this matter. The primary beneficiary test focuses on whether the intern or the employer is the primary beneficiary of the relationship. For purposes of unpaid internship analysis utilizing the primary beneficiary test, the 2nd Circuit set forth a non-exhaustive list of considerations which include: (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 interns formal education program by integrated coursework or the receipt of academic credit; (4) the extent to which the internship accommodates the interns academic commitments by corresponding to the academic calendar; (5) the extent to which the internships duration is limited to the period in which the internship provides the intern with beneficial learning; (6) the extent to which the interns work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern; and (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. No one factor is dispositive in applying the primary beneficiary test. Instead, according the 2nd Circuit, a weighing and balancing of all circumstances is necessary to determine whether the intern or the employer is the primary beneficiary of the relationship.
The 2nd Circuit decision is a positive development for employers interested in utilizing unpaid interns at their workplace as the primary beneficiary test is more practical and less than rigid than the test endorsed by the DOL. Likewise, it is a positive development for individuals interested in gaining real work experience through unpaid internships. However, it is important to note that there is still a lot of uncertainty surrounding the issue of when unpaid interns will be considered employees for purposes of the FLSA inasmuch as other federal circuits may take a different approach than 2nd Circuit and the DOL disagrees with the 2nd Circuits decision. Employers should give strong consideration to both the DOL six factor test and the primary beneficiary test in structuring unpaid internships. Among other things, unpaid internships should center around training and educational opportunities to avoid FLSA liability.
The St. Louis employment attorneys at McMahon Berger have been representing employers across the country in labor and employment matters, including those relating to the FLSA, for almost sixty years, and are available to discuss these issues and others. As always, the foregoing is for informational purposes only and does not constitute legal advice regarding any particular situation as every situation must be evaluated on its own facts. The choice of a lawyer is an important decision and should not be based solely on advertisements.