In recent years, the issue of whether unpaid interns have been misclassified and should be considered employees has been an ongoing issue for entertainment and media industry, where class action lawsuits have been brought and settled for millions of dollars. The U.S. Court of Appeals for the Second Circuit recently established a new “primary beneficiary” test for verifying if unpaid interns are in fact employees for the purposes of the federal Fair Labor Standards Act and the New York Labor Law. The new test, established in Glatt v. Fox Searchlight Pictures, Inc. is accommodating to the modern internship and allows companies to draft compliant internship programs. The focus is on what the intern receives for his/her work while also allowing courts the ability to examine the economic relation between the intern and employer. It also reflects a “central feature of the modern internship –the relationship between the internship and the intern’s formal education.” The Second Circuit set specific factors to consider when determining if a worker is an employee or not, which a court must weigh and balance.
This article examines the primary beneficiary test and its implications for employers.