Second Circuit Court of Appeals Revises Intern vs. Employee Test

In a past blog we wrote about a case in which movie studio interns who worked on the movie, “Black Swan,” claimed that they were misclassified as interns and were really employees, who should have been paid at least the minimum wage and overtime pay for hours worked beyond 40 in a workweek.  On July 2, 2015, the United States Court of Appeals for the Second Circuit, which covers New York, Connecticut and Vermont, ruled that the lower court erred in finding that unpaid interns should have been deemed “employees” for purposes of coverage under the Fair Labor Standards Act (FLSA).  In so doing, the Second Circuit rejected the U.S. Department of Labor’s tests for determining this issue

In Glatt v. Fox Searchlight Pictures, the Second Circuit adopted a new standard for  determining whether an unpaid intern is really an employee entitled to minimum wage and overtime payments.  According to the Second Circuit, “the proper question is whether the intern or the employer is the primary beneficiary of the relationship.”  In resolving this question, the Second Circuit held that courts should weigh and balance the following non-exhaustive list of factors:

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.

In adopting its analysis, the Second Circuit rejected the Department of Labor’s test, which was based upon a 1947 Supreme Court decision, which the court felt did not take into account “the role of internships in today’s economy.”

The court’s adopted standard is less stringent than the Department of Labor’s standard, which was previously used in making such determination.  Nevertheless, issues of misclassification require a case-by-case analysis and consideration of the totality of the circumstances.    Moreover, the Second Circuit’s test only focuses on misclassification issues arising under the FLSA, and might not be adopted by courts interpreting the particular wage laws of New York, Connecticut or Vermont.

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