Tuesday, July 7, 2015

Second Circuit Rejects DOL's 6-Factor Unpaid Intern Test

Last week, in Glatt v. Fox Searchlight Pictures (opinion here),  the Second Circuit rejected the Department of Labor's six-factor test for distinguishing lawful unpaid interns from regular old employees (who must be paid minimum wage and overtime).

Let's back up... what's the six-factor test? As I blogged 5 years ago (have I really been doing this for over five years?), the DOL advocates using a six-factor test to identify "trainees" (including unpaid interns):
1. The training, even though it includes actual operation of the facilities of the employer, is similar to what would be given in a vocational school or academic educational instruction;
2. The training is for the benefit of the trainees; 
3. The trainees do not displace regular employees, but work under their close observation; 
4. The employer that provides the training derives no immediate advantage from the activities of the trainees, and on occasion the employer’s operations may actually be impeded; 
5. The trainees are not necessarily entitled to a job at the conclusion of the training period; and 
6. The employer and the trainees understand that the trainees are not entitled to wages for the time spent in training.
So, you just apply this test? Not so fast! Courts do not have to follow the DOL's test - although there are established rules for what level of deference various agency tests are due. The deference issue gets about two sentences from the Second Circuit... to the extent DOL's test was based on its interpretation of an old Supreme Court case, it is due little if any deference; at best it gets "Skidmore" deference, which just means that the Court considers the guidance only to the extent the Court finds it persuasive.

Apparently the Court didn't find it very persuasive, because it completely rejected the six-factor test. So, what test did the Second Circuit use? I'm glad you asked!
[T]he proper question is whether the intern or the employer is the primary beneficiary of the relationship. The primary beneficiary test has two salient features. First, it focuses on what the intern receives in exchange for his work. Second, it also accords courts the flexibility to examine the economic reality as it exists between the intern and the employer.
(citations omitted). So, what test should you use? The six-factor test? Primary benefit test? Some hybrid of the two? Or maybe another judicially created test? Well, it depends on your jurisdiction. Unfortunately, in a lot of jurisdictions, we just don't have a clear answer yet. In the Second Circuit, we do have an answer: the primary benefit (or beneficiary) test.

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