Recipients of the benefits of unpaid intern labor everywhere recoiled in horror in June of 2013 when a Federal District Court Judge in Manhattan held that unpaid interns on the set of the film “Black Swan” were protected by minimum wage and other employment laws. Since then, employers have been looking at that college kid earning “valuable work experience” by bringing them their coffee with a wary eye. Fret not, employers, for the Second Circuit has overturned the results in the “Black Swan” case (better known as Glatt, et al. v. Fox Searchlight Pictures, Inc.) while simultaneously rejecting a Department of Labor test for unpaid internships in a deft display of legal agility and coordination that can only be described as “balletic”.

In Glatt, the District Court relied on a six factor test issued by the Department of Labor in 2010 that defined how unpaid interns are classified for purposes of federal wage and hour law. These six factors were not created out of whole cloth by the DOL, but rather culled from a 1947 Supreme Court decision involving unpaid railroad brake trainees, Walling v. Portland Terminal Co. Under the DOL test, the relationship between employer and intern must meet all six criteria to be exempt from wage and hour laws.

The Second Circuit in Glatt found the DOL test too restrictive, instead laying out its own non-exhaustive list of considerations for unpaid internships:

  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.

For those concerned that the District Court’s ruling in Glatt signaled the end of unpaid internships, the Second Circuit’s reversal of that decision should spell relief. Rather than enforce a set of six inerrant rules as to interns, the court opted for a middle ground that provides a flexible framework for crafting legal internship programs with an education bent.

Employers should still be wary – this decision only applies in the Second Circuit for now, so other circuits may choose to follow the Department of Labor guidelines. The Sixth Circuit, for instance, has taken a somewhat softer stance than other circuits on whether unpaid volunteers qualify for the antidiscrimination protections of Title VII of the Civil Rights Act of 1964, which could signal a more sympathetic ear in general to the plight of unpaid workers.