The test for determining whether unpaid interns at a for-profit employer are employees under the Fair Labor Standards Act, and thus entitled to compensation for services provided, has been the subject of considerable litigation over the past few years. Employers now have recent guidance from two federal appellate courts to use in analyzing their intern programs.

In Glatt v. Fox Searchlight Pictures, Inc., Nos. 13‐4478; 13‐4481 (2d Cir. Jan. 25, 2016), the Second Circuit (which covers district courts in Connecticut, New York and Vermont) explained that, in determining whether an individual is an intern or employee, the salient question is whether the intern or the employer is the “primary beneficiary” of the relationship. The court identified a set of non-exhaustive factors that must be weighed and balanced:

  1. The extent to which the intern and the provider of the internship clearly understand that there is no expectation of compensation. Any promise of compensation, express or implied, suggests that the intern is an employee;
  2. The extent to which the internship provides training similar to that which would be given in an educational environment, including the clinical and other hands-on training provided by education 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 beneficial learning to the intern;
  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; and
  7. The extent to which the intern and the provider of the internship understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship.

The Second Circuit revisited the “primary beneficiary” test earlier this month in Wang v. The Hearst Corporation, No. 16‐3302 (2d Cir. Dec. 8, 2017). The plaintiffs there alleged that they were, in reality, unpaid employees, and not interns. They argued that they obtained no real practical educational or vocational benefits because their work “experience” involved taking minutes of meetings, or learning about photoshoots (which the intern in question was already familiar with). The plaintiffs also argued that they completed some work that was regularly performed by paid employees.

Notwithstanding these facts, the court held that summary judgment was appropriately entered in favor of the employer. The court reasoned that an intern may perform complementary tasks and, in doing so, confer tangible benefits on supervisors, without being transformed into an employee. It noted that the Glatt court intentionally omitted a factor that had been advanced by the Department of Labor – that the alleged employer derives no immediate advantage from the activities of the intern. The court also explained that, while the plaintiffs sought to minimize the experience they received, the fact was that the internships did provide beneficial training, including day-to-day training in the professional environments.

Ten days later, in Benjamin v. B&H Education, No. 15-17147 (9th Cir. Dec. 19, 2017), the Ninth Circuit (which covers district courts in Alaska, Arizona, California and Hawaii) adopted the Second Circuit’s “primary beneficiary” test, concluding that this test “best captures the Supreme Court’s economic realities test in the student/employee context and that it is therefore the most appropriate test for deciding whether students should be regarded as employees under the FLSA.” In Benjamin, the court held that former students at a cosmetology and hair design school with locations in California and Nevada were interns and not employees, despite the fact that the school derived some income from individuals receiving the salon services. The court noted that the students acknowledged that they would not be paid for their clinical services; they received hands-on training and academic credit for their efforts; their clinical work was coordinated with their academic schedules; the clinical work satisfied the practical hours required prior to taking state licensing exams and ended once a sufficient number of such hours was achieved; they did not displace paid employees of the school; and they had no expectation of employment with the school after graduation.

Employers contemplating an internship program, or assessing an existing program, should carefully review Wang and Benjamin, and should confer with their employment counsel to determine if these factors apply in their jurisdiction.