On Friday, the Department of Labor finally abandoned its rigid
six-factor test for determining whether unpaid student interns were employees covered by
the FLSA. It announced that
it would be clarifying and updating its enforcement policies to conform to recent federal court rulings. The Sixth
Circuit rejected the DOL’s test Solis v.
Laurelbrook Sanitarium and School, Inc., 642 F.3d 518 (6th Cir.
2011) in favor of the primary beneficiary test.
In that case, a school required its students to engage in “practical”
education, which the DOL had alleged violated the FLSA’s child labor
prohibitions. Instead, the DOL required
employees to meet all six factors of
the DOL’s test.
More recently, the Second Circuit (in New York) rejected the DOL’s strict test in favor of examining the economic realities of the primary beneficiary test when holding that interns on the movie Black Swan were students instead of employees. Glatt v. Fox Searchlight Pictures, Inc., 791 F.3d 376 (2nd Cir. 2015), amended and superseded by 811 F.3d 528 (2d Cir. 2016). This was followed by the Eleventh Circuit (in Atlanta) in Schumann v. Collier Anesthesia, P.A., 803 F.3d 1199 (11th Cir. 2015). Just last month, the Ninth Circuit in California– hardly a fortress of conservative thinking – also rejected the DOL test in favor of the primary beneficiary test. Benjamin v. B & H Education, Inc., No. 15-17147 (9th Cir. 12/19/17).
Under the
primary beneficiary test explained in Laurelbrook,
the proper approach for determining whether an employment
relationship exists in the context of a training or learning situation is to
ascertain which party derives the primary benefit from the relationship.
Factors such as whether the relationship displaces paid employees and whether
there is educational value derived from the relationship are relevant
considerations that can guide the inquiry. Additional factors that bear on the
inquiry should also be considered insofar as they shed light on which party
primarily benefits from the relationship.
The Glatt court suggested the following factors be considered in evaluating whether the
student or the employer are the primary beneficiaries of the relationship:
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.
The DOL has not formally adopted the federal court test as stated, but it is unlikely to stray very far under the circumstances. The best thing about this decision is that it comes in
plenty of time for employers to structure their summer internships.
NOTICE: This summary is designed merely to inform and alert you
of recent legal developments. It does not constitute legal advice and does not
apply to any particular situation because different facts could lead to
different results. Information here can be changed or amended without
notice. Readers should not act upon this information without legal advice. If
you have any questions about anything you have read, you should consult with or
retain an employment attorney.
