I have been following the protracted saga developing in the Second Circuit concerning whether interns are employees. Recently, this Circuit overturned a lower court decision that granted conditional certification to an intern (and the putative class) alleging that they were statutory employees. That case is entitled Glatt et al. v. Fox Searchlight Pictures Inc. Concomitantly, in Wang v. The Hearst Corp., the Second Circuit upheld a ruling that denied certification in another intern case.

The appellate court concluded that the “primary beneficiary test” should be utilized to determine if the plaintiffs were employees, rather than the test espoused by the plaintiffs, which was the individuals would be deemed employees if their “employer” derived some immediate benefit from their work.

The Second Circuit would not defer to the USDOL’s six-part test set forth in a 2010 fact sheet offering guidance as to what constituted an “unpaid internship,” concluding that this “test” was essentially derived from the almost seventy-year old US Supreme Court Portland Terminal Company decision and further opined that the DOL did not possess a “special competence or role” when it came to interpreting court rulings. The Court chided the DOL test for being “too rigid.”

The Court sided with the defendants who asserted that the correct analysis was whether the intern or the employer was the primary beneficiary of their relationship; the defendants urged scrutiny of seven non-exhaustive factors in that determination.

Those factors include: 1) if there is a clear understanding that there is no expectation of compensation; 2) whether interns receive training similar to what they would get an educational environment; and, 3) to what the extent the internship is tied to a formal education program. Even though the Court rejected the six factor DOL fact sheet, the Court did not express an opinion on the result in a “new” case brought under the primary beneficiary test.

The Takeaway

There certainly is an issue with possibly abusive internships involving what is commonly referred to as “grunt work.” These workers should be entitled to the protection of the FLSA, i.e. minimum wage and overtime. There are, however, a great many internships that people strive mightily to secure and which fit the criteria enumerated by the Second Circuit.

As is the case with so many wage-hour/personnel issues, a policy, clearly outlining the terms and conditions of the internship, will go a long way to establishing to a court (if need be) that the particular internship fits within these new guidelines. Maybe new guidance will issue from the DOL.

Maybe the US Supreme Court will ultimately decide the issue…