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Are Interns Employees or Just Servants? New Test by 2nd Circuit

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By Casey C. Sullivan, Esq. on July 15, 2015 6:58 AM

Unpaid internships are some of the most miserable, abusive, and exploitative forms of labor around -- and you can go ahead and take advantage of them again, so long as you meet the new standard announced this month by the Second Circuit.

The Second Circuit's ruling reverses a 2013 district court decision that unpaid interns could file a class action for back wages and overtime. That decision caused many companies to curtail or eliminate their unpaid internship programs. Now, however, the court has proposed seven non-exclusive considerations used to determine when an intern might be entitled to pay, potentially opening the door for a return to widespread unpaid internships.

Your Classic Furniture Arranging Internship

The unpaid interns in question were college students who had worked on Fox Searchlight's film "Black Swan" or in Fox's corporate offices. Their work was, let's say, not the most skilled. Eric Glatt, an NYU student, worked five days a week, ten hours a day, copying, scanning, and filing documents. Alexander Footman, from Wesleyan, worked ten hour days arranging furniture, taking lunch orders, and throwing out trash. Eden Antalik was required to get an internship to graduate from Duquesne University. She gained important experience in making travel arrangements, ordering catering, and setting up press rooms.

These interns were not exactly pleased with journeyman positions. They filed a class action, arguing that they and similar interns were in fact employees, entitled to minimum wage and overtime under the federal Fair Labor Standards Act and New York Labor Law.

The New "Primary Beneficiary Test"

The Second Circuit acknowledged that internships can benefit students when properly designed; otherwise, they're simply exploitation. Some interns may, indeed, actually be employees. The question was not if that can occur, but how. The students, the Department of Labor, and defendant employers all proposed tests to determine when an intern became an employee.

The court went with the employers. Under the "primary beneficiary test" adopted by the Second Circuit, the question is whether the intern or the employer is the primary beneficiary of the relationship. If the employer gains the most, the intern is an employee. If not, she remains an intern, unentitled to pay. To determine the balance, the court proposed seven considerations:

1. A shared understanding regarding compensation
2. Whether the training provided is similar to that given in an educational environment
3. The connection between internship and educational program
4. An internships accommodation of academic commitments
5. The limited duration of the internship
6. Whether the intern's work complements or displaces other employees' work
7. Whether an intern is entitled to paid work at the end

As for the class action itself, the Second Circuit ruled that the considerations require individualized proof. Since the plaintiffs had put forth only generalized evidence regarding their internships, their class certification was invalid, though they may get another shot on remand.

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