Internships—It’s All About Who Benefits

In yesterday’s Advisor, BLR® Legal Editor Jasmin Rojas, JD, presented the Department of Labor’s (DOL) test for classifying interns—and how the 2nd Circuit court disagreed with the test after a suit was brought by a couple of interns who worked on the movie Black Swan and/or at the Fox corporate offices. Today, Rojas elaborates on how the court altered the internship test and what it all means for employers.

The court said that in determining whether a worker is, in fact, an intern, the following factors that consider the totality of the circumstances should be taken into consideration:

1. The extent to which the intern and the employer clearly understand that there is no expectation of compensation;
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; 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.

Have you noticed that some of your employees have the potential to be effective leaders? Get them the training they need with BLR’s TrainingToday Leadership for Employees Library. Get the details here.

The court explained that it was appropriate to weigh and balance all of the circumstances. Indeed, no one factor is dispositive and every factor does not need to “point in the same direction” for a court to conclude that an intern is not entitled to the minimum wage. In addition, and importantly, these factors are not dispositive. The courts can consider additional relevant evidence beyond these factors.
Therefore, the 2nd Circuit sent the case back to the trial court with instructions to utilize this new test.

Not a “Class” Act Yet!

The 2nd Circuit concluded that the new test also posed a problem for the class certification. In essence, the court reasoned that the question of an intern’s employment status is a highly individualized inquiry.
Therefore, even if the plaintiffs could establish that Fox had a policy of replacing paid employees with unpaid interns, they could not show that each person in the class was likely to prevail on a claim that he or she was an FLSA employee under the primary beneficiary test. As a result, the 2nd Circuit also gave the trial court instructions to reexamine the issue of classification under the new standard.

Trying to get your employees trained to show leadership? It isn’t easy to fit it in—schedulewise or budgetwise—but now there’s BLR’s Leadership for Employees Library. Train all your people, at their convenience, 24/7, for one standard fee. Get More Information.

What Does This Mean for Employers?

In addition to the 2nd Circuit, the 6th Circuit Court of Appeals (which covers Kentucky, Michigan, Ohio, and Tennessee) has also rejected the DOL’s six-factor test in favor of a primary benefit inquiry. Both circuits’ decisions are practical in that they aptly reflect the fact that many of today’s unpaid internships are highly competitive placements.
While admittedly benefiting employers, they are designed to give a candidate the experience needed to stand out in a slow economy. Nevertheless, many employers shy away from internships, or are hesitant to give unpaid interns any “real” experience out of fear that they will be in violation of the FLSA and/or state laws.
This case, however, does not necessarily mean that employers in these circuits do not have to use caution when utilizing unpaid interns. First, state law may differ from the federal court’s interpretation. Thus, while an employer may not be in violation of the FLSA, it could violate state wage and hour laws by improperly classifying a worker as an intern.
Furthermore, remember that the focus remains on whether the “intern” is receiving training akin to, or as a part of, an academic program. Therefore, if the worker is performing menial tasks without an attached educational component, he or she would most likely be classified as an employee that must be paid.
The tougher question is how to classify a worker who is not working in exchange for academic credit but is receiving bona fide training. For clarity on this particular issue, it is always best to consult with qualified labor and employment counsel.