Is an intern an employee? This question is expected to be answered in the coming weeks – at least for employers in the Second Circuit.
Specifically, the Federal Court of Appeals for the Second Circuit Court is expected to answer this question after it reviews two earlier conflicting opinions in two separate cases filed that were filed by unpaid interns. The opposite outcomes in the unpaid intern cases essentially left employers and their unpaid internship programs in legal limbo.
The Fox Searchlight Black Swan Intern Case – In June 2013, a New York district court judge agreed with former Fox Searchlight Pictures interns that they deserved minimum wages for their work at the company. The two interns in that case worked on the 2010 film Black Swan and claimed in a lawsuit that during their time at Fox, they received no compensation even though they completed work assignments that were typically the responsibility of paid employees. Those tasks included taking lunch orders, answering phones, and making travel arrangement.
The Hearst Corporation Intern Case – In May 2013, a conflicting decision was reached when a New York District Court judge agreed with Hearst Corporation and ruled that it did not violate labor laws by not paying its unpaid interns while they interned at Harper’s Bazaar, Cosmopolitan, Marie Claire, and other magazines.
Despite the similarity of the cases, the District Court judges reached opposite results because they relied on different approaches to determine if interns should be covered by employee protections. Specifically, the District Court judges relied upon a 1947 Supreme Court ruling in a case about railroad trainees, which eventually served as the basis for an internship fact sheet the Department of Labor compiled in 2010. That fact sheet identifies six criteria that the federal Labor Department says must be met in order for an unpaid internship to be legal, which are as follows:
- The internship, even though it includes actual operation of the facilities of the employer, is similar training which would be given in an educational environment;
- The internship experience is for the benefit of the intern;
- The intern does not displace regular employees, but works under close supervision of existing staff;
- The employer that provides the training derives no immediate advantage from the activities of the intern and on occasion its operations may actually be impeded;
- The intern is not necessarily entitled to a job at the conclusion of the internship; and
- The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.
So two judges, looking at substantially identical facts, using the same test, but reaching opposite conclusions? Essentially what happened is that the judge in the Fox case used the Department of Labor criteria as a rigid checklist. As such, the judge found that the movie studio failed to meet every requirement. In contrast, the judge in the Hearst case, used the rules as more of a “framework” (referred to as a “balancing of the benefits test”) for assessing the employee-employer relationship, which looks to the “totality of circumstances” to evaluate the “economic reality” of the relationship. Under the “framework” test, the judge in the Hearst Case decided the employer met enough of the Department of Labor’s requirements to make its unpaid internships legal.
The Second Circuit is expected to rule in the coming weeks which interpretation is correct.
Obviously Federal and Michigan labor and employment laws apply to employment relationships. But the two cases above illustrate that the question of what counts as an employment relationship for legal purposes is not so simple. And because of the uncertainty, some employers have simply ended their internship programs. Others have began to pay interns (See Claire Zillman’s article in Fortune, “Unpaid interns have their day in court—again“).
For me personally, I’m pulling for the “framework” argument to win, but for purely personal and selfish reasons that have nothing to do with representing employers and a belief that internships provide valuable experience. Instead, I grew up believing rules were more of a guide or a framework rather than a rigid mandate to follow. This view, however, was often at odds with my parents and teachers. So I’m looking for validation from the Second Circuit Court of Appeals that I had the correct view. An opinion is expected to be issued in the coming weeks and I have my “I told you so” letter ready to go out.
For more information about your company internship programs or other Federal and Michigan employment law compliance issues, contact employment attorney Jason Shinn. Mr. Shinn has been practicing law since 2001 in the areas of federal and Michigan employment law and litigation, as well as investigating workplace misconduct. He prefers to work with companies on the front end in order to avoid employment lawsuits.