On July 2, 2015, in Glatt v. Fox Searchlight Pictures and Wang v. The Hearst Corporation, the Second Circuit Court of Appeals addressed when unpaid interns are “employees” entitled to compensation under the Fair Labor Standards Act (FLSA) and New York Labor Law (NYLL). This was a question of first impression for the Second Circuit. The plaintiff interns in Glatt argued that whenever an employer receives an immediate benefit from an intern’s efforts the intern is functioning as an employee. The U.S. Department of Labor, as amicus curiae in support of the plaintiffs, asserted that its exhaustive six factor test derived from Walling v. Portland Terminal, a nearly seventy year old Supreme Court case about prospective railroad brakemen, was the appropriate standard to use to assess whether an intern is an employee. The defendant employers urged the Second Circuit to consider an approach in which an intern is only an employee when the “primary beneficiary” of the internship is the employer rather than the intern. In an amicus brief in support of neither party, but submitted on behalf of the American Council on Education and five other organizations representing the collective interests of higher education institutions, Bond attorneys argued that the Department of Labor’s rigid six factor test is inappropriate in the intern context. The amici asked the Court to recognize the role that institutions of higher education play in assessing the value of an internship experience and adopt an analysis that focused on the “primary beneficiary” of the internship. A nuanced approach would, according to the amici, both preserve essential experiential learning opportunities and identify those internships that are exploitative. Institutions of higher education have long understood that real-world experiences offered by internships, combined with classroom instruction, best prepare students to become productive members of the workforce. Many colleges and universities integrate internships into their curriculum, also recognizing that competitive job applicants are those who have not just spent four years in the bubble of academia, but can also cite real-world experience. The amici, concerned with preserving as many legitimate internship experiences as possible, further pointed out that student-interns, upon their return to campus, often share their varied experiences in the classroom to the benefit of their peers as well as the institution, which becomes a more vibrant center for learning because of the experiences of its students. In Glatt and Wang the higher education community cautioned against an outcome that would unduly pressure employers to end unpaid internship programs because of concerns about FLSA and NYLL liability. The Second Circuit ultimately rejected the Department of Labor’s rigid six factor test and instead created a multi-factored, non-exhaustive set of considerations that while consistent with the spirit of Portland Terminal focuses on the “primary beneficiary” of the intern-employer relationship. The Second Circuit’s non-exhaustive set of considerations as articulated in Glatt are:

1. 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;
2. 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 institution;
3. The extent to which the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit;
4. The extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic calendar;
5. The extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning;
6. 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;
7. 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.

The Second Circuit, in these cases, recognized the importance of preserving experiential learning opportunities. Its non-exhaustive set of factors outlined in Glatt is a compromise that will help achieve two important goals of the higher education community: protecting interns from exploitative practices and preserving essential hands-on learning opportunities. For more on Wang and Glatt see Bond’s July 7, 2015 post here.

Effective June 14, 2014, the New York City Human Rights Law will extend its nondiscrimination protections to unpaid interns.  An intern is defined as “an individual who performs work for an employer on a temporary basis whose work: (a) provides training or supplements training given in an educational environment such that the employability of the individual performing the work may be enhanced; (b) provides experience for the benefit of the individual performing the work; and (c) is performed under the close supervision of existing staff.” The amendment was enacted in response to Wang v. Phoenix Satellite Television US, Inc., a 2013 Southern District of New York decision which held that unpaid interns do not qualify as employees under the New York City’s Human Rights Law. There is a similar effort underway to amend the New York State Human Rights Law, which could reach a Senate vote shortly. This has implications for higher education institutions in New York City who host interns from other institutions on their campuses, as well as for their own students who intern off-campus.  And in those circumstances where an institution is sufficiently involved with a hosting employer that it could constitute a joint employer for employment law purposes with that hosting employer, there is the potential for additional exposure.  In this latter instance, the impact of the amendment could even extend to institutions outside of New York City (and the direct jurisdiction of the NYC Human Rights Law) that send students to intern with New York City employers.  The nondiscrimination policies of all these institutions should be reviewed to ensure that they appropriately address interns. On a somewhat related note, lawyers from Bond recently submitted an amicus brief on behalf of the American Council on Education, and others, urging the Second Circuit to defer to higher education institutions on the value of unpaid internships in the context of federal wage-hour law.