When is an unpaid internship, simply a ruse for an underhanded employer to gain free employment of an unsuspecting applicant?
At The CA Law Firm we’ve represented clients who participated in internships that required extensive commitments, high level work product, and no training at all. In these cases, the “interns” were in fact “employees” – and we recovered substantial back pay and additional damages for these clients.
The Department of Labor has spoken on the issue. The DOL has stated in order to determine whether interns are employees under the Fair Labor Standards Act, the “primary beneficiary” test (first adopted by the U.S. Court of Appeals for the Second Circuit in its 2015 ruling in Glatt v. Fox Searchlight Pictures Inc., 811 F.3d 528 (2d Cir. 2015)), is the law of the land.
A “primary beneficiary” test should be used to distinguish employees from interns under the FLSA. That test requires courts to analyze the “economic reality” of the intern’s relationship with his or her employer to evaluate who is the winner of the primary benefit of the fruits of the internship. If the employer is the primary beneficiary, the intern must be compensated as an employee under at least the minimum wage provisions of the FLSA. If the intern primarily benefits from the relationship, the internship can be unpaid.
The primary beneficiary test is a “flexible test” with seven non-exhaustive factors:
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’s duration is limited to the period in 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.
No single factor is determinative. The Ninth Circuit Court of Appeals (which covers the State of California) recently became the fourth federal appellate court to adopt the flexible Glatt primary beneficiary test. See Benjamin v. B & H Educ. Inc., 877 F.3d 1139 (9th Cir. 2017). The DOL explained that it was adopting the primary beneficiary test to conform to the courts’ holdings and eliminate confusion about the applicable rules in determining whether an intern should be considered a paid employee under the FLSA.
Previously, a six-factor test was in place that indicated an intern was an employee unless ALL six of the criteria under the test were met. Those six-factors were: 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.
Even if only one of these factors was not met, the intern was classified as an employee entitled to the minimum wage under the FLSA. By contrast the Glatt primary beneficiary test provides “increased flexibility”. All seven factors of the Glatt test must be weighed, balanced, and considered under a totality of the circumstances. Sometimes, evidence outside the seven factors can be admitted by a court in its determination as well.
If you feel you’ve been misidentified as an intern, when in fact you should be a full-fledged employee, contact the lawyers at The CA Law Firm for a free consultation. You’ll pay NO ATTORNEYS FEES UNLESS AND UNTIL COMPENSATION IS RECOVERED IN YOUR FAVOR.