2nd Circuit Adopts Employer-Friendly Standard for Unpaid Internships
Author: Michael Cardman, XpertHR Legal Editor
July 7, 2015
Establishing an unpaid internship program has become less risky for employers in New York, Connecticut and Vermont in the wake of a new appeals court ruling.
In Glatt v. Fox Searchlight Pictures, Inc., the 2nd Circuit Court of Appeals adopted an employer-friendly standard for determining whether an intern should be considered an employee entitled to the minimum wage and overtime under the Fair Labor Standards Act (FLSA).
The 2nd Circuit rejected the more employee-friendly six-factor test, which is used by the US Department of Labor (DOL) and considered by certain other appeals courts, calling it "too rigid."
Instead, the 2nd Circuit held that "the proper question is whether the intern or the employer is the primary beneficiary of the relationship," a standard drawn from a decades-old Supreme Court ruling, Walling v. Portland Terminal Co.
To answer this question, the 2nd Circuit said that courts should consider the extent to which:
- The intern and the employer clearly understand that there is no expectation of compensation;
- 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;
- The internship is tied to the intern's formal education program by integrated coursework or the receipt of academic credit;
- The internship accommodates the intern's academic commitments by corresponding to the academic calendar;
- The internship's duration is limited to the period in which the internship provides the intern with beneficial learning;
- The intern's work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern; and
- The intern and the employer understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship.
Although these considerations are similar to the DOL's six-factor test, the 2nd Circuit noted that, "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." In contrast, the DOL will consider an intern to be an employee unless all six factors of its test are satisfied.
Not only did the Glatt ruling set a more employer-friendly standard for determining whether an intern is an employee, it also made it more difficult for interns to file collective actions by holding that the interns' claims were too individualized to be certified as a class.