Diserio Martin O'Connor & Castiglioni LLP

Court Speaks to Issue of Unpaid Interns

July 24, 2015

The popularity of unpaid internships has given rise to new legal protections. On July 2, 2015, the United States Court of Appeals for the Second Circuit issued two decisions[1] wherein it adopted an individualized test for determining an intern’s employment status under the Fair Labor Standards Act (“FLSA”) and New York Labor Law. As a result of these decisions, employers must take note of the factors which may classify their unpaid interns as “employees” that are entitled to compensation under the law.

FACTORS 

As the Court noted, the question of an intern’s employment status is a highly individualized inquiry which focuses on whether the intern or the employer is the “primary beneficiary” of the relationship. An unpaid intern is an employee under the FLSA when the employer, rather than the intern, is the primary beneficiary of the parties’ relationship. The Court noted that this approach reflects a central feature of the modern internship—the relationship between the internship and the intern’s formal education. It recognized that while internships are widely supported by educators and employers looking to hire well-trained graduates, employers can also exploit unpaid interns by using their free labor without providing to them an appreciable benefit in education or experience. As a result, the Court identified seven factors for consideration:

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 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 it 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 the weighing and balancing of all of the circumstances. None of the factors is dispositive. This approach is flexible in that not every factor must support the conclusion that the intern is not an employee entitled to wages. These considerations merely constitute a list of non-exhaustive factors to aid courts in answering the question of whether the intern or the employer is the primary beneficiary of the relationship.     

WORKFORCE CONSIDERATIONS

Employers must be wary of the composition of their workforce and their ability to hire interns. If you are an employer that currently employs unpaid interns or is seeking to hire an unpaid intern, you may be required to pay that intern wages depending on the circumstances of your relationship with him or her.  Careful consideration of the seven factors outlined by the Second Circuit Court will assist in properly structuring unpaid internships and avoiding unintended paid employment relationships.­­­­­­­­­­­­­­

Attorneys in our Employment Law Department can assist employers in complying with this new law. 

For more information, please contact Scott S. Centrella, Chair of DMOC’s Employment Law Department, at 203-358-0800 or SCentrella@dmoc.com.



[1] Glatt v. Fox Searchlight Pictures, Inc., Nos. 13–4478–cv, 13–4481–cv, 2015 WL 4033018 (2d Cir. 2015) and Xuedan Wang v. Hearst Corp., No. 13–4480–cv, 2015 WL 4033091 (2d Cir. 2015).