Second Circuit Weighs In On When Unpaid Interns Become 'Employees' Under The FLSA

In 2011, a pair of unpaid interns who worked for Fox Searchlight Pictures on the 2010 film Black Swan filed suit against Fox claiming they should have been compensated as "employees" under the US Fair Labor Standards Act (FLSA) and New York labor law. Shortly thereafter, another Fox intern joined the case and filed a class and collective action against the company alleging the entire Fox unpaid internship program violated federal and state law. In June 2013, the district court granted the interns' motion for summary judgment, certified the class, and conditionally certified the collective action. These rulings led to a cascade of other lawsuits filed against media and entertainment companies, including a similar class action filed against The Hearst Corporation. There, the lower court granted the interns' motion for summary judgment, but denied their motion for class certification on the grounds that there was no common internship program at issue amongst the plaintiffs.

On July 2, 2015, the Second Circuit Court of Appeals reversed the lower court decisions against Fox and The Hearst Corporation, rejecting their reliance on the United States Department of Labor's (DOL) six-factor test1 often used for determining when an intern is an "employee" under the FLSA. Instead, the Second Circuit adopted the "primary beneficiary" test; a test followed in large part by the Fourth, Sixth and Eighth Circuits.2 Contrary to the DOL's rigid six-part test, under the "primary beneficiary" test, the critical inquiry becomes whether "the intern or the employer is the primary beneficiary of the relationship." To reach that conclusion, the Second Circuit suggests courts weigh a variety of non-exhaustive factors, including:

the extent to which the internship is tied to a formal education program, the extent to which the intern's work complements, rather than displaces, the work of paid employees, and the extent to which the intern and employer understand that the internship is conducted without being entitled to pay or the expectation of employment at the conclusion of the internship. The Second Circuit has remanded both cases back to the district court for further proceedings. Several commentators have suggested that the plaintiffs will most likely be able to satisfy the primary beneficiary test and move forward with their class certification efforts. The Second Circuit's opinion, however, calls that analysis into question. For example, the Second Circuit...