United States: Second Circuit Establishes New Test For Unpaid Intern Claims

Last Updated: July 8 2015
Article by Christopher A. Parlo and Samuel S. Shaulson

The Second Circuit's ruling provides employers with greater leeway for unpaid internship programs and a stronger defense for class-action lawsuits brought by unpaid interns.

In a long-awaited decision, the US Court of Appeals for the Second Circuit established a new standard for determining whether interns should be classified as "employees" eligible for minimum and overtime wages, among other legal protections. In two related cases, Glatt, et al. v. Fox Searchlight Pictures, Inc., et al. and Wang, et al., v. The Hearst Corp., the Second Circuit adopted a new "primary beneficiary" test and identified seven nonexclusive factors relevant to the classification of unpaid interns. In so doing, the court rejected strict application of the US Department of Labor's (DOL's) six-factor test and confirmed that "courts may consider relevant evidence beyond [their own] specified factors[.]" The court further held that the question of an intern's employment status is a "highly individualized inquiry," thus raising the bar for future interns who may seek to bring class-action claims against companies.


The Second Circuit decisions come on the heels of a wave of intern litigation since the US District Court for the Southern District of New York's summary judgment ruling in favor of the plaintiff interns and approval of class certification in Glatt on June 11, 2013. In contrast, just a few weeks before the Glatt ruling, in Wang, the Southern District of New York denied those plaintiff interns' motions for summary judgment and class certification. In the two years since those decisions, dozens of intern class-action lawsuits have been filed, primarily against companies in the fashion and entertainment industries. Given the legal uncertainty and inevitable litigation-defense fees, companies throughout these and other industries have had little choice but to reevaluate their internship programs, sometimes while simultaneously defending class-action lawsuits. With these new decisions, employers now have a more defined framework for creating and implementing unpaid internship programs, as well as strong precedent to defend potential or current class-actions claims.

New Factors Relevant to Intern Classification Established

In Glatt, the Second Circuit found that the DOL test (which requires, in part, that a company receive no immediate advantage or benefit from interns) was unpersuasive and overly rigid. Instead, the Second Circuit held that a more appropriate analysis would focus on the key question of whether an intern or an employer is the "primary beneficiary" of the relationship. The court explained that this primary beneficiary test is inherently flexible and focuses on both the benefits that the intern receives in exchange for his or her participation in the internship program as well as the economic reality that exists between the intern and employer. The court articulated the following seven factors to aid courts in determining whether an intern is an employee under the federal Fair Labor Standards Act (FLSA) and New York Labor Law (NYLL):

  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 institutions.
  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 year.
  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 instructed courts to no longer treat any single factor as dispositive. Rather, the seven enumerated factors are a nonexhaustive list, and other relevant factors may also be considered. Further, each factor need not favor a party for a court to conclude that the intern(s) in question was not an "employee" under the FLSA and NYLL. Perhaps most important, the Second Circuit rejected the use of the DOL's requirement that there be no benefit to the company. Instead, the new test articulated by the Second Circuit is focused on who is the "primary beneficiary" of the internship (and with significant emphasis on the extent to which the internship is tied to the intern's overall educational experience).

The Second Circuit's new test is far more employer-friendly than the six factors previously identified by the DOL, and employers may now further rely on the flexibility of this test when developing and implementing unpaid internship programs. Provided that an intern receives a significant educational benefit and doesn't serve as a direct replacement for paid employees, the fact that the employer is receiving benefits does not mean that the intern should automatically be treated as an employee.

These factors also illustrate the importance of making sure that an employer's internship program emphasizes educational development. As the Second Circuit explained, "The purpose of a bona-fide internship is to integrate classroom learning with practical skill development in a real world setting." This focus on the close relationship between internship programs and education is meant to more accurately reflect the role of internships in the modern economy and their tool as a training and development mechanism for young adults.

Application to Class-Action Certification

In what could potentially be a far more influential portion of the Glatt and Wang decisions for companies defending lawsuits, the Second Circuit declared that "an intern's employment status is a highly individualized inquiry" not conducive to class-action treatment. Indeed, the court noted that even if a plaintiff could establish that its employer had a policy of replacing paid employees with unpaid interns, that fact alone would not mean that each intern in the putative class would prevail under the primary beneficiary test. As the Second Circuit described it, that precise question is "the most important issue in each case." Therefore, because the questions requiring individualized proof were more substantial than those that could be answered with generalized proof, the Second Circuit ordered that, on the current facts, neither the Glatt or Wang cases could proceed on a class basis under Federal Rules of Civil Procedure Rule 23 (FRCP 23). The court did not, however, categorically preclude the possibility of certification if other facts emerge on remand.

Notably, the Second Circuit explained that although it was presented with the question of whether a higher standard applied to FLSA conditional certification motions after discovery was taken, it did not need to address this question because the proposed intern class would not even meet the "minimal pre-discovery" standard for conditional certification. The court stated, "Under the primary beneficiary test we have set forth, courts must consider individual aspects of the intern's experience." Therefore, and referring back to the reasons that the court ruled that FRCP 23 certification was improper, it vacated the Glatt district court's order conditionally certifying a rule 23 class.

Finally, although the Second Circuit's language that a trial court must conduct an individualized fact-specific inquiry will make it difficult for future cases brought by interns to proceed on a class basis, as noted above, the court did state that it was nonetheless possible for a class to be certified under the appropriate circumstances. Thus, the door is still open for other former interns to bring wage and hour litigation, either on an individual or representative basis.

Next Steps and Practice Pointers

With the Second Circuit's guidance now available, employers should take this opportunity to review any existing internship programs to ensure compliance with the new test. Given the greater flexibility these decisions afford employers, employers may consider expanding the scope of existing internship programs or implementing a new (paid or unpaid) internship program. Despite this guidance, risk still remains any time an employer engages unpaid interns, and employers should consult with knowledgeable counsel when developing or implementing an unpaid internship program.

This article is provided as a general informational service and it should not be construed as imparting legal advice on any specific matter.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions