Tuesday, July 21, 2015

When does an intern deserve to get paid under the FLSA?

From time to time I see a news article about whether interns should be paid for their work. The Court of Appeals has now weighed in on this issue, setting forth a multi-part test to determine whether interns have any rights under the Fair Labor Standards Act.

The case is Glatt v. Fox Searchlight Pictures, decided on July 2. This case was certified as a class action for all interns who worked for defendant from 2005 through 2010. The named plaintiffs were hired as interns and did a little bit of this and a little bit of that for the company, i.e., handling publicity, taking out the trash, photocopying, making deliveries, and so on. The question for the Second Circuit is "under what circumstances [must] an unpaid intern ... be deemed an 'employee' under the FLSA and therefore compensated for his work."

After reviewing a Department of Labor policy guideline from 1967 and a Supreme Court ruling from 1947, the Second Circuit (Walker, Jacobs and Wesley) formulates the standard, but not before noting the position advanced by each side:

The plaintiffs urge us to adopt a test whereby interns will be considered employees whenever the employer receives an immediate advantage from the interns’ work. ... The defendants urge us to adopt a more nuanced primary beneficiary test. Under this standard, an employment relationship is created when the tangible and intangible benefits provided to the intern are greater than the intern’s contribution to the employer’s operation.
[W]e agree with defendants that the proper question is whether the intern or the employer is the primary beneficiary of the relationship. The primary beneficiary test has two salient features. First, it focuses on what the intern receives in exchange for his work. Second, it also accords courts the flexibility to examine the economic reality as it exists between the intern and the employer.
Here is the legal standard that the Second Circuit adopts for these cases:

In the context of unpaid internships, we think a non‐exhaustive set of considerations should 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 intern’s formal education program by integrated coursework 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.

Applying these considerations requires weighing and balancing all of the circumstances. No 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. In addition, the factors we specify are non‐exhaustive—courts may consider relevant evidence beyond the specified factors in appropriate cases.
Courts love multi-part tests to solve legal problems. Since no single factor is dispositive, it will take years for litigants and courts to work through this legal standard. The first judge to do so will be the district court which first handled this case. The order granting plaintiffs partial summary judgment is vacated and the case is remanded to the judge to decide the case again. The order certifying the proposed class action is also vacated, and the district court must take up that issue again, as well.

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