The U.S. Court of Appeals for the Second Circuit has rejected the stringent test endorsed by the U.S. Department of Labor (DOL) for determining whether an unpaid intern should be considered an employee under the federal Fair Labor Standards Act (FLSA), and thus entitled to compensation. The appeals court adopted a more employer-friendly balancing standard instead.
In Glatt v. Fox Searchlight Pictures, Inc., Nos. 13-4478, 13-4481 (2d Cir. July 2, 2015), and in a related order in Wang v. The Hearst Corp., No. 13-4480 (2d Cir. July 2, 2015) (summary order), the Second Circuit held that the proper analysis for determining whether interns must be paid is the “primary beneficiary” test, which considers “whether the intern or the employer is the primary beneficiary of the relationship.”
DOL’s test, which was articulated in guidance issued by the agency in 2010, requires the employer to treat an intern as an employee entitled to compensation unless the employer can prove six prescriptive factors showing that the intern is not an employee protected by the FLSA.
Although the legal analysis for determining whether an intern is an employee under the FLSA is highly fact specific, the Second Circuit’s decision provides a helpful roadmap, especially for companies operating within the jurisdiction of that court, for designing an internship program that significantly limits the potential for FLSA violations.
A copy of the Second Circuit’s decision in Glatt is available here.