Unpaid Internships Revived?: Second Circuit Gives The Green Light To Unpaid Internships So Long As The Intern 'Benefits'

On July 2, 2015, the United States Court of Appeals for the Second Circuit issued its highly anticipated decision concerning unpaid internships, Glatt v. Fox Searchlight Pictures, Inc., No. 134478-cv (2d Cir. July 2, 2015). In a victory for employers, the Court adopted a flexible "primary beneficiary" test to determine whether or not a worker is an intern or an employee.

Plaintiffs worked for Fox Searchlight Pictures as interns, performing tasks such as making photocopies, arranging travel and running errands for "Black Swan" Director Darren Aronofsky (including getting him a hypoallergenic pillow, a scented candle, and his favorite tea). Although they often worked eight hours a day, five days a week, the interns received no wages. The district court found that these interns were actually employees entitled to minimum wage and overtime under the Fair Labor Standards Act (FLSA) and the New York Labor Law (NYLL).

On appeal, Plaintiffs urged the Court to adopt a test under which interns would be considered employees whenever the employer received an immediate advantage from the interns' work. The U.S. Department of Labor (DOL) submitted a brief in support of Plaintiffs, urging the Court to adopt its six-factor test for an employer to properly classify someone as an "intern." These factors include, for example, whether the internship experience is for the benefit of the intern, whether the intern displaces regular employees, and whether the employer derives an immediate advantage from the intern's work. The DOL urged the Second Circuit to conclude that all factors must be met to classify someone as an intern.

The Court rejected these arguments in favor of the flexible "primary beneficiary" test advanced by Defendants. This test asks whether the primary beneficiary of the internship is the intern or the employer. If the intern is the primary beneficiary, he or she is a true "intern" and is not covered by the minimum wage and overtime provisions of the FLSA and NYLL. If the employer is the primary beneficiary, the intern is actually an employee entitled to minimum wage and overtime.

When applying this test, the Court emphasized that the determination should rest largely on the internship's educational benefits and set out a non-exhaustive list of factors for courts to weigh when evaluating the primary beneficiary:

The extent to which the intern and the employer clearly understand that there is no expectation of compensation. Any promise of...