In the past, we’ve explained the DOL’s test for whether employers must pay their interns. Put simply, public employers and qualifying not-for-profit entities do not have to pay their interns. On the other hand, private employers must meet each point in a six-factor test for an internship to qualify as unpaid under the Fair Labor Standards Act. The Second Circuit is currently reviewing the case that started the most recent intern frenzy, where former interns sued Fox Searchlight pictures for unpaid wages on the set of the movie, Black Swan in Glatt et al., v. Fox Searchlight Pictures Inc., No. 11-6784 (S.D. N.Y. June 11, 2013). As you may recall when we reported on this case back in June 2013, relying on the DOL’s six-factor test and considering the totality of the circumstances, the district court determined that some of the plaintiffs were improperly classified as unpaid interns and were “employees” covered by the FLSA and a similar state statute.
At the Second Circuit’s invitation, the DOL submitted an amicus brief in support of the district court’s decision, providing employers with some additional guidance on how the DOL interprets the six-factor test (summarized in our earlier post linked above).
In general, the DOL advised the court that an intern is “less likely” to be an “employee” for FLSA purposes if the internship was “set up for the specific purpose of providing targeted educational training to the intern rather than being a general introduction to the workplace or a particular industry; benefits the intern because of the educational nature of the internship rather than providing the employer with free entry-level labor; provides close supervision and therefore does not displace regular employees; and does not include compensation or promise of a job…” At first glance, this seems to be the guidance we’ve known about for years. Looking more closely, though, what is noteworthy about the brief is the DOL’s explanation of these points.
Most importantly, the DOL explains that it is “critical” for bona fide internships to incorporate an educational component that “imparts substantial education content that is transferable beyond the confines of the particular workplace…” Explaining what it means by a “general introduction to the workplace,” the DOL explains that a bona fide internship must give the intern “more than the general skills and exposure that any new employee would receive in [the] first few months on the job.”
The DOL also expects that the education component will continue throughout the entire internship, not just for part of it. College credit is one factor the DOL will consider, but it will look at the flipside, too: are interns working in roles that a new hire or existing employee would have covered if the intern was not there? The DOL explains that businesses who are dependent on the intern’s work are essentially accepting “free entry-level labor,” not providing content for the intern’s benefit as the six-factor test requires. The DOL expects interns to receive “close supervision,” and that the agency will view an intern who receives the same level of supervision as a regular employee as an employee, too.
Of course, an internship must be unpaid and “should not be used as a trial period for permanent employment.” Similarly, the DOL’s brief indicates that the length of internships should be “fixed, rather than an open-ended, period of time.” The DOL also warns employers that the productive work an intern does cannot be offset by the “primary” or “relative” benefit the intern receives. In particular, the DOL rejects claims that a worker can qualify as an intern simply by receiving “intangible” benefits.
Insights for Employers
The Second Circuit may not ultimately adopt either the district court’s or the DOL’s position on whether Fox Searchlight should have classified its interns as employees. Even if it rejects them completely, though, employers should read the DOL’s guidance in the brief carefully. It is unlikely that anything short of a Supreme Court decision would cause the DOL to abandon its principles on unpaid internships.
Given the continued focus by the DOL on unpaid internships, underscored by its filing in the Second Circuit, you should carefully review your unpaid internship programs as the summer ends and in preparation for the next crop of interns. If you have come to rely on substantive contributions and benefits of work from interns each summer or during school semesters, the DOL’s demanding test means you will likely have a hard time justifying your internship program as unpaid, even if you have done things the same way for decades, even if your “interns” get school credit, and even if you think every other employer in the industry does the same thing as you do.