The recent flurry of FLSA lawsuits brought on behalf of unpaid interns claiming to be employees has finally spawned appellate guidance. In a pair of decisions issued on July 2, 2015, the Second Circuit rejected the DOL’s six-part test for determining whether an intern working in the for-profit private sector is actually an employee, and therefore entitled to the minimum wage and overtime pay. That test was embodied in a Fact Sheet published in 2010 and was “essentially a distillation of the facts discussed” in the U.S. Supreme Court’s 1947 decision in Walling v. Portland Terminal Co. The Court of Appeals deemed the DOL’s test “too rigid for our precedent to withstand” and instead adopted a “primary beneficiary” test that focuses on “whether the intern or the employer is the primary beneficiary of the relationship.”
The test formulated by the Second Circuit in Glatt v. Fox Searchlight Pictures, Inc., and applied in Wang v. The Hearst Corp., is comprised of the following “non-exhaustive set of considerations”:
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.
The Second Circuit emphasized that “[a]pplying these considerations requires weighing and balancing all of the circumstances” and 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.” Because the district courts applied the discredited six-part test set out in the DOL’s Intern Fact Sheet, the Court of Appeals vacated the decisions and remanded the cases to allow the lower courts an opportunity to assess the plaintiffs’ status under the newly conceived “primary beneficiary” test.
Lawrence Peikes, Wiggin and Dana LLP