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Second Circuit sets guidelines for whether unpaid interns should be considered employees

Facts: "Plaintiffs, who were hired as unpaid interns, claim compensation as employees under the Fair Labor Standards Act and New York Labor Law." Pp.1. These unpaid interns worked on either the Black Swan film or at Fox, corporate offices. The allegations are that Fox violated Federal and New York Labor Law, the minimum wage and overtime provisions.

Plaintiff Eric Glatt was a NYU graduate who worked (during his graduate program) on the Black Swan film. He did not receive credit for his internship and would perform copying, scanning, document filing, tracking purchase orders and, amongst other things, transporting paperwork to the Black Swan set. After his first internship, he interned again, working two days a week which, again, required him to perform a myriad of tasks including the purchase of a non-allergic pillow for the Director, Darren Aronofsky. Similarly, Plaintiff Alexander Footman was also a graduate student who worked as an intern on the Black Swan set. Like Glatt, he was responsible for a myriad of tasks that did not seem to be related to the Black Swan or movie production including but not limited to picking up and setting up office furniture, taking out the trash, answering phones, lunch orders, making coffee, accepting deliveries and other obscure tasks, like bringing tea to Director Aronofsky and dropping off a DVD of Black Swan footage to Aronofsky's apartment.

Issue: " At its core, this interlocutory appeal raises the broad question of under what circumstances an unpaid intern must be deemed an 'employee' under the FLSA and therefore compensated for his work." Pp. 7.

Standard: [the FLSA requires employers to pay all employees a specified minimum wage, and overtime of time and one‐half for hours worked in excess of forty hours per week. 29 U.S.C. §§ 206‐07. NYLL requires the same, except that it specifies a higher wage rate than the federal minimum. See N.Y. Labor Law § 652. An employee cannot waive his right to the minimum wage and overtime pay because waiver “would nullify the purposes of the [FLSA] and thwart the legislative policies it was designed to effectuate.” Barrentine v. Arkansas‐Best Freight Sys., Inc., 450 U.S. 728, 740 (1981) (internal quotation marks omitted); see also Tony & Susan Alamo Found. v. Secʹy of Labor, 471 U.S. 290, 302 (1985) (exceptions to coverage under the FLSA affect more people than those workers directly at issue because exceptions are “likely to exert a general downward pressure on wages in competing businesses”).] Pp. 8-9.

T1: " On October 19, 2012, plaintiffs filed their first amended class complaint seeking unpaid minimum wages and overtime for themselves and all others similarly situated… After discovery, Glatt and Footman moved for partial summary judgment, contending that they were employees under the FLSA and NYLL." Pp. 6-7. The District Court concluded that Glatt and Footman were improperly classified as unpaid interns rather than employees. An interlocutory appeal was taken and the Second Circuit (T2) reversed and remanded with instructions for the primary beneficiary test (Rule):

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. (Pp. 14-15)(external quotation marks omitted).

The Second Circuit noted that the Supreme Court of the United States has not yet addressed the difference between unpaid interns and paid employees under the FLSA. "In 1967, the Department of Labor (“DOL”) issued informal guidance on trainees as part of its Field Operations Handbook." Pp. 10. This fact sheet provided six factors to determine whether an employment relationship existed. Here, the district court evaluated the Plaintiff's employment using a modified version of this test but did not explicitly require that all six factors had to be present to "establish that the intern is not an employee and instead balanced" the six factors. Pp. 11. Because the above two plaintiffs made four out of six criteria, the district court found their classification as unpaid interns improper.

Second Circuit: [When properly designed, unpaid internship programs can greatly benefit interns. For this reason, internships are widely supported by educators and by employers looking to hire welltrained recent graduates. However, employers can also exploit unpaid interns by using their free labor without providing them with an appreciable benefit in education or experience. Recognizing this concern, all parties agree that there are circumstances in which someone who is labeled an unpaid intern is actually an employee entitled to compensation under the FLSA....The purpose of a bona‐fide internship is to integrate classroom learning with practical skill development in a real‐world setting, and, unlike the brakemen at issue in Portland Terminal, all of the plaintiffs were enrolled in or had recently completed a formal course of post‐secondary education. By focusing on the educational aspects of the internship, our approach better reflects the role of internships in today’s economy than the DOL factors, which were derived from a 68‐year old Supreme Court decision that dealt with a single training course offered to prospective railroad brakemen.] Pp. 11 and 16.

Holding: The above list is non-exhaustive and the factors require a weighing and balancing. " No one factor is dispositive and every factor need not point in the same direction for the court to conclude that the intern is not an employee entitled to the minimum wage. In addition, the factors we specify are non‐exhaustive—courts may consider relevant evidence beyond the specified factors in appropriate cases." Pp. 15. The purpose of an internship is to integrate classroom learning and not, as is likely going to be the case, whether a warm body can setup and breakdown furniture or fetch tea for the director. The Second Circuit makes clear that the focus is on the educational aspects of the title.

Conclusion: The Court, agreeing with the defendants, finds that the test should be "whether the intern or the employer is the primary beneficiary of the relationship" (Pp. 13) and set out a non-exhaustive list to make that determination.

The Case is Glatt et al. v. Fox Searchlight Pictures, Inc. et al., 13‐4478‐cv (L) (2d Cir. July 2, 2015),

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