SAM GOODMAN—As 2016 kicks off, employers will ramp up recruiting efforts at universities across the country to fill coveted summer internship positions. Should employers and students alike anticipate a changing internship economy? A recent pair of decisions in New York and Florida suggest that the answer may be yes.
In July 2015, the Second Circuit Court of Appeals was tasked with determining whether two movie production interns working on the set of Black Swan were employees for purposes of the Fair Labor Standards Act (“FLSA”) and therefore entitled to wages. The plaintiffs, Eric Glatt and Alexander Footman, worked between 30 and 50 hours a week and performed tasks such as copying and filing documents, tracking purchase orders, keeping the take-out menus up to date, making coffee, and answering phone calls. At one point, Glatt trekked over a mile through Brooklyn to buy the director a hypoallergenic pillow, but he and Footman were never paid.
Surprisingly, the Second Circuit vacated the June 2013 decision siding with the interns, a decision in which the district court judge embraced the Department of Labor’s 6-factor test used to determine the employment status of unpaid interns. Instead, the court promulgated its own non-exhaustive 7-factor test, agreeing with the movie studio that that the proper question is “whether the intern or the employer is the primary beneficiary of the relationship.”
In September 2015, the Eleventh Circuit Court of Appeals entertained a claim brought by a group of graduate-level nurse anesthetists who completed clinical work as an element of their academic curriculum. The clinical work was not only required for degree conferral, but it was also mandated by the governing accreditation agencies and Florida law. The Court adopted the Second Circuit’s interpretation of the “primary beneficiary” standard wholesale for the group of clinical interns and remanded the case to be determined under that new test. Importantly, the Court also suggested that the employment status of student interns does not need to be assessed on an all-or-nothing basis, but that interns may be deemed employees for certain activities (and entitled to wages) and interns for other activities (and not entitled to wages).
The recent decisions in Florida and New York are problematic for several reasons. As a threshold issue, these decisions only add to employers’ and students’ confusion in navigating the complexities of the FLSA. The real root of the problem is that the FLSA’s definition of “employee” is ambiguous at best and the Supreme Court has yet to address the issue of unpaid internships head on. Consequently, the courts have been forced to rely on a tangentially-related Supreme Court decision issued roughly 80 years ago. In that case, the Supreme Court carved out an exception to the minimum wage requirement of the FLSA for “trainees,” finding that prospective railroad workers engaged in a week-long training program aimed at securing employment with the railroad were not employees for purposes of the FLSA and, thus, not entitled to wages. In the wake of the decision—and with no further guidance—the courts have developed drastically different approaches to assess the employment status of various working relationships, most notably interns.
Employers and students are faced with yet another convoluted standard assessing the legality of unpaid internships with the Second Circuit’s new interpretation of the “primary beneficiary” test. This is problematic for the employer tasked with designing an internship program that complies with the FLSA because an internship program may very well be compliant in one jurisdiction but risk the possibility of litigation in another. Similarly, students have little guidance on what their legal rights are as interns and whether they are being exploited. The confusion is palpable: While some critics argue that the new “primary beneficiary” standard is a victory for employers and will cause a chilling effect on unpaid internship lawsuits, others argue that the new test is a step in the right direction for the intern.
Additionally, the Second Circuit is the first federal appeals court to decide whether unpaid internships at for-profit companies violate the minimum wage requirement of the FLSA. Consequently, district and appellate courts in other jurisdictions will inevitably turn to the decision for guidance in evaluating subsequent unpaid internship claims. If the Eleventh Circuit’s immediate adoption of the new “tweaked primary beneficiary” test is any indication of the future, the standard may quickly make its way to other jurisdictions. Unfortunately, the Second Circuit provided little guidance as to what subsets of interns the standard applies to, or if the test applies across the board to all students who take part in an internship. The crux of the problem is the new standard’s emphasis on the relationship between the internship and the student-intern’s education. While the clinical internships before the Eleventh Circuit may fit neatly into this model (at least facially), the internships at issue before the Second Circuit were completely independent of any degree program. For this reason, some believe the Black Swan interns are still entitled to wages. As plaintiff Alex Footman explains, “the decision suggests a presumption that interns are enrolled in an integrated educational program. My work on ‘Black Swan’ was nothing of the sort.”
If other jurisdictions adopt the new “primary beneficiary” test, students and employees alike will at least experience increased uniformity in treatment by the courts and additional clarity on the permissibility of internship programs. The test’s effectiveness and its scope of application will be further defined as more courts confront unpaid internship claims. Regardless, guidance from the Supreme Court on unpaid internships remains necessary and time-sensitive given the meteoric rise of the unpaid internship in recent years. For 2016, at least, students and employers should expect that unpaid internships are here to stay in several jurisdictions as long as they are primarily benefitting the student.