Second Circuit Says Interns Are Not Employees

Last week the Second Circuit reversed and remanded a decision by the District Court where the lower court had found that former unpaid interns for Fox Searchlight (“Fox”) were actually employees while they worked on the film Black Swan.

The interns were responsible for duties including copying documents, maintaining takeout menus, assembling furniture, taking out trash and, in one case, procuring a nonallergenic pillow for Darren Aronofsky, the film’s director. It is likely that the interns will prevail when the case is sent back to the District Court, given that the tasks performed were seemingly more beneficial to the production and post-production of the film than they were to the interns’ training and educational experience.

The court established that for an employer to lawfully treat interns as nonemployees the “primary beneficiary” of the internship must be the intern. In addition to meeting that condition, before the Second Circuit ruling, there were six points of consideration under the Department of Labor’s Fair Labor Standards Act (“FLSA”) that had to be met to determine that an internship did not constitute an employment relationship. Those criteria included the following:

• The internship, even though it includes actual operation of the facilities of the employer, is similar to training which would be given in an educational environment;
• The internship 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 activities of 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 spent in the internship.

In ruling in favor of Fox, the Second Circuit stated that an “intern’s employment status is a highly individualized inquiry” and that in certain circumstances an intern may be an employee. Thus, a new set of factors were proposed to substitute and further clarify the highly criticized Department of Labor’s above six-point criteria. The proposed non-exhaustive set of considerations consists of:

• 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 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.

Ultimately, the Second Circuit decision raises the bar for future interns seeking to bring claims against current or former employers. The new guidelines may lead to many companies having to re-evaluate their unpaid internship policies and duties.

For more information on the requirements and limitations of internships and how this ruling could affect your business, please contact Philip S. Mortensen.