Recent court cases have illuminated the need to pay interns who act as employees. In Glatt v. Fox Searchlight Pictures, Inc., the Second Circuit Court of Appeals decided that unpaid interns deserved compensation as employees under the Fair Labor Standards Act and New York wage and hour law.
The plaintiffs in the case were each enrolled in college degree programs and also worked as unpaid interns on the set of the movie Black Swan and at Fox Pictures’ New York offices. They worked five days per week for as much as 7 hours per day.
The Court considered the 2010 Intern Fact Sheet of the U.S. Department of Labor, but dismissed that guidance and announced an alternative set of determining factors. The Intern Fact Sheet said that an employment relationship did not exist if:
- The internship, even though it includes actual operation of facilities of the employer, is similar to training which would be given in an educational environment;
- The intern experience is for the benefit of the intern;
- The intern does not displace regular employees but works under close supervision of existing staff;
- The employer that provides the training derives no immediate advantage from the intern and on occasion its operations may actually be impeded;
- The intern is not necessarily entitled to a job at the conclusion of the internship; and
- The employer and the intern understand that the intern is not entitled to wages for the time in the internship.
The Court disregarded the 6 factor test and instead said the proper question is whether the intern or the employer is the primary beneficiary of the relationship. This, according to the court, would focus on what the intern receives in exchange for his work and the economic realities of the situation.
The following 7 factors were identified by the Court:
- The extent to which the intern and the employer understand the expectation of no compensation;
- The extent the internship provides training that would be provided in an educational environment;
- The extent to which the internship is tied to formal education or class credit;
- The extent to which the internship accommodates academic commitments;
- The extent to which the internship is limited in duration to what would provide the intern beneficial learning;
- The extent to which the intern work complements rather than displaces work of paid employees; and
- The extent to which the intern and the employer understand that there is no entitlement to a paid job at the conclusion of the internship.
Employers that wish to implement internship programs should consider the DOL factors, along with the Second Circuit factors when determining whether the intern should be paid or unpaid.
