Blog readers who have been following the recent wave of wage and hour lawsuits by interns will recall that the Second Circuit, in a major decision issued in early July, held that the “primary beneficiary” test should govern whether interns were properly classified as such or should have been treated as full-fledged employees.

In the first appellate decision since then, the Eleventh Circuit agreed with the reasoning underlying that ruling. Rejecting the Department of Labor’s six-factor test and adopting the Second Circuit’s “non-exhaustive set of considerations,” the Eleventh Circuit held that courts evaluating interns’ claims should “focus on the benefits to the student while still considering whether the manner in which the employer implements the internship program takes unfair advantage of or is otherwise abusive towards the student.”

The plaintiffs in Schumann v. Collier Anesthesia, P.A. were interns in an anesthesia practice that provided training for student-registered nurse anesthetists. The clinical training, which required experience in 550 different patient cases, was mandatory to obtain both a master’s degree in the specialty and the professional license required to practice as a registered nurse anesthetist. They sued the owners of the practice and the for-profit college where they were enrolled, arguing that they were unlawfully denied minimum wage and overtime during their clinical internships.

The District Court granted summary judgment in favor of the defendants, holding that the students were not employees under the FLSA and thus not entitled to minimum wage or overtime pay. The appellate court vacated that decision and remanded with instructions to evaluate the interns’ claims under the factors listed by the Second Circuit in Glatt v. Fox Searchlight Pictures, Inc.:

  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.

Like the Second Circuit, the Schumann court said the DOL’s six factors were entitled to limited deference and concluded that the Glatt factors were a better reflection of the “modern internship.” In particular, it noted that students’ willingness to work as unpaid interns “drive[s] the need for the internships to exist,” as opposed to employers’ business need for interns. It also cited the public interest in promoting clinical internships in order to obtain professional licenses and the risk that an anesthesiology practice would face in hiring inexperienced students.

The court then examined the interns’ experiences under the Glatt factors, noting the following facts that supported a finding that the students were bona fide interns rather than employees: the dates of the internships corresponded to the academic calendar; and the length of the program was not excessive (although the court acknowledged that if the students were required to work “grossly excessive hours,” that would weigh in favor of employee status). The court was not persuaded by a Medicare rule, on which the plaintiffs relied, that allowed the clinic to be reimbursed for the students’ work in place of full-time nurses, although it did advise the District Court to take a closer look at that factor.

In a related development, the DOL recently released a guide for employers that encourages them to establish programs for interns as a way to transition students into the workplace. While the focus of the guide is on students with disabilities, much of the DOL’s text could be read to apply to internships more generally. Of particular note, the DOL states that, while pay may not be a “central motivation” for interns, payment is considered a “best practice” to attract a “wider array of candidates.” The guide directs employers to the six-factor test to determine whether interns must be paid the minimum wage. (See the discussion of the DOL guide on our Employment Law Lookout blog here.)

The fate of those six factors remains to be seen. For now, two federal appellate courts have rejected them in favor of a more flexible approach. Other courts will surely register their views soon as well.