Second Circuit Announces New Test For Intern Claims And Puts The Brakes On Class And Collective Claims By Interns

On July 2, 2015, the U.S. Court of Appeals for the Second Circuit issued two eagerly awaited decisions that may dampen the recent wave of collective and class actions filed by unpaid interns claiming they should be paid employees. In Glatt v. Fox Searchlight Pictures, Inc. et al., Nos. 13-4478 & 13‐4481 (2d Cir. 2015) and Wang v. Hearst Corp., No. 13‐4480‐cv (2d Cir. 2015) (summary order), the court announced a new "primary beneficiary test," identified seven non-exhaustive factors relevant to classifying interns as employees in the for-profit sector, and rejected strict application of the six factor test promulgated by the United States Department of Labor (DOL). Equally noteworthy, the court largely foreclosed collective and class certification in intern cases by emphasizing the highly individualized inquiry required by its new test.

GLATT v. FOX SEARCHLIGHT PICTURES, INC.

In Glatt, three unpaid interns sued Fox Searchlight for compensation under the Fair Labor Standards Act (FLSA) and New York Labor Law (NYLL), claiming they had been misclassified and should have been treated as employees entitled to minimum wage and overtime pay. Two plaintiffs moved for partial summary judgment, contending they were employees under federal and New York law, while the other plaintiff moved for conditional and class certification of the interns at certain Fox divisions. The district court granted the motions, Fox appealed, and the Second Circuit vacated both orders and remanded the case for further proceedings.

Second Circuit Establishes New Test for Intern Claims

On appeal, the plaintiffs in Glatt urged the Second Circuit to adopt a test whereby interns will be considered employees when the employer obtains an "immediate advantage from the interns' work." The DOL, appearing as an amicus curiae in support of the plaintiffs, argued that the Second Circuit should defer to the six factor test contained in its Intern Fact Sheet as well as its requirement that every factor be present to find that an individual qualifies as a bona fide intern. Fox Searchlight proposed that the Second Circuit adopt a "primary beneficiary" test that analyzes "whether the intern or the employer is the primary beneficiary of the relationship."

The Circuit Court rejected the DOL's six factor test (which requires, in part, that a company receive no immediate advantage or benefit from interns), as overly rigid and not consistent with modern day internships. Instead, it adopted the...