If you are a regular reader of this blog, you are probably familiar with the six-factor test that the U.S. Department of Labor uses to determine whether an intern should be considered an employee for purposes of the Fair Labor Standards Act. (If not, DOL Fact Sheet # 71 provides a summary, and we explained the test in greater detail in an earlier post.) Recently, the Eleventh Circuit Court of Appeals issued an opinion in which it held that the DOL's test is outdated and fails to reflect the economic realities of the modern clinical internship programs required for many professions. In its place, the Eleventh Circuit joined the Second Circuit in adopting an updated and more flexible test to determine when an internship is primarily for the benefit of the student or an employer. Schumann v. Collier Anesthesia, P.A. (11th Cir., Sept. 11, 2015) (.pdf)

Facts

The plaintiffs in Schumann included twenty-five former student registered nurse anesthetists ("SRNAs") who attended a master's degree program at Wolford College, LLC with the goal of becoming certified registered nurse anesthetists ("CRNAs"). To become CRNAs, students had to complete a master's degree including a 4-semester clinical component during which students had to participate in a minimum of 550 cases. Wolford offered a 28-month master of science program that fulfilled these requirements. 

A Private, for-profit college, Wolford was wholly owned by several anesthesiologists who also had an interest in an anesthesia practice, Collier Anesthesia P.A. The plaintiff students obtained "some, if not all" of their required clinical education at facilities where Collier Anesthesia practiced. Under Medicare rules, Collier was able to bill for services performed by SRNAs during their clinical training. In their lawsuit against Collier and Wolford, the students maintained that they should have been treated as employees for purposes of the FLSA, and that Collier and Wolford therefore should have paid them at least minimum wage and overtime for all hours worked during their clinical internships. Among other things, they argued that they were required to work long hours - often more than 40 hours per week - and that Collier profited from their work by substituting unpaid SRNAs for CRNAs. 

Applying the six-factor U.S. Department of Labor test, the trial court granted summary judgment for the defendants, finding that the student plaintiffs were bond fide interns.  The students appealed.  

The Court's Ruling

The court began its analysis by explaining that the DOL's six-factor test originated nearly seventy years ago with the Supreme Court's ruling in Waling v. Portland Terminal Co., 330 U.S. 148 (1947). That decision considered a seven- to eight-day training program that a railroad offered to prospective brakemen in order to ensure that it had a pool of qualified applicants available for hire. Applying the test used in that situation to a multi-year clinical training program offered as part of an academic degree and a requirement of professional licensure was, according to the court, "like trying to use a fork to eat soup."

Instead, the court endorsed a "tweaked" version of the six-factor test, previously adopted in the Second Circuit. Under this test, a court considering whether interns should be considered employees should consider the following 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.

The court emphasized that this list of factors is non-exclusive, and that no single factor is dispositive. Further, the court noted that the analysis is not an "all or nothing" proposition. For example, if an intern is required to perform duties completely unrelated to their educational program - like washing an instructor's car - the intern could be regarded as an employee for purposes of the time spent on those unrelated duties, but not otherwise. Similarly, if an intern is required to put in hours that greatly exceed the time needed for them to obtain the educational benefits of the program, this may be taken as evidence that at least the excess hours should be considered compensable under the FLSA.  

Impact on Employers

While a setback for the defendants in this case, the Eleventh Circuit's ruling is largely a positive development for employers and educational institutions offering clinical internship programs. It updates some of the more outdated aspects of the Department of Labor's six-factor test, making it clear for example that interns are not necessarily employees merely because the school or internship site receives some remuneration for the services they provide.

However, the flip-side of this flexibility is ambiguity that may open the door to new kinds of claims by interns and clinical students. Students may for example use this ruling to challenge particular aspects of an internship or clinical program that extend beyond the bare requirements of the academic degree or certification they are seeking. 

Educational institutions and employers who offer internship programs should continue to follow case law in this area, as it will undoubtedly continue to develop. Further, they should be cognizant of the fact that this test has been adopted so far in only two federal circuits, and that the U.S. Department of Labor continues to follow its older, more stringent test for determining whether interns should be considered employees.