Phoenix House placement does not entitle plaintiff to salary under the FLSA

A few years ago, the Second Circuit devised a legal framework guiding when volunteers are entitled to minimum wage and overtime protections under the Fair Labor Standards Act. We call them the Glatt factors, named after Glatt v. Fox Searchlight Pictures, Inc., 811 F.3d 528 (2d Cir 2016). The Court now applies the Glatt factors to any number of factual situations, like this one, involving a man who was assigned work duties while undergoing treatment at a residential drug and alcohol treatment facility. The Court says he was not an employee under the Fair Labor Standards Act and therefore cannot recover fair compensation for his work.

The case is Vaughn v. Phoenix House New York, Inc., decided on April 22. Under the Glatt factors,

“the proper question is whether the intern or the employer is the primary beneficiary of the relationship.” The “primary beneficiary test” has “three salient features:” (1) its “focus[ ] on what the intern receives in exchange for his work,” (2) its “flexibility to [permit] examin[antion] of the economic reality” of the relationship, and (3) its acknowledgement that the intern-employer relationship is subject to unique considerations in light of the intern’s expected “educational or vocational benefits that are not necessarily expected with all forms of employment.” In performing this analysis, we ask the district courts to evaluate a “non-exhaustive set 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 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.18We emphasized 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.”

Plaintiff loses the case because the factors tilt in favor of the employer. There was no real expectation of compensation, and the program largely provided "beneficial learning." While plaintiff's work complemented and did not displace the work of paid employees, the other factors are sort of a wash. What ultimately loses the case for plaintiff is the sixth factor insofar as plaintiff was not an intern but was serving a placement that provided him with significant benefits: rehabilitation treatment and a place to live, with food and vocational training. This means that plaintiff was not an "employee" under the FLSA and therefore does not get paid for his work at the Phoenix House.