Companies throughout the country rely on interns in various capacities. The question is whether these companies have to pay their interns minimum wage. The Fair Labor Standards Act ("FLSA") requires that all employers pay employees at least minimum wage and overtime of time and one--‐half for hours worked in excess of forty hours per week.
Recently, in the matter of Glatt v. Fox Searchlight Pictures, Inc., the United States Court of Appeals for the Second Circuit examined the internship relationship of various workers on the set of the movie, Black Swan and provided clarity to the question of whether interns are "employees" under the FLSA and whether they should be entitled to minimum wage.
The court held that the test used to determine whether an intern is an employee is whether the internship relationship "primarily benefits" the intern.
The court in Glatt reviewed certain factors enumerated by the U.S. Department of Labor's ("DOL") to determine whether interns qualify as employees. In declining to rely on the standards set forth by the DOL, the court crafted its own set of criteria to review in determining whether the internship relationship primarily benefits the intern, to wit:
- 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.
- 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.
- The extent to which the internship is tied to the intern's formal education program by integrated coursework or the receipt of academic credit.
- The extent to which the internship accommodates the intern's academic commitments by corresponding to the academic calendar.
- The extent to which the internship's duration is limited to the period in which the internship provides the intern with beneficial learning.
- 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.
- 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 noted that this approach reflects a central feature of the modern internship—the relationship between the internship and the intern's formal education. The court stated, "when properly designed, unpaid internship programs can greatly benefit interns." The court also noted that "some employers exploit unpaid interns by using their free labor without providing them with an appreciable benefit in education or experience."
What is clear with the court's decision in Glatt is that there needs to be an educational component to the internship program and the program must primarily benefit the intern. If a company is having its interns run errands, make coffee, copy documents, answer phone calls, file papers, etc., it is hardly providing any educational benefit to the intern. Further, these tasks can and should be performed by paid employees.
In light of this decision, it may be time for your company to revisit its internship program to ensure compliance with the current state of the law. The consequences of failing to properly compensate interns who are actually employees can be tremendous.