Spring is around the corner, with summer not far behind, so thoughts naturally turn to the obvious topic: internships.
Although the volume of new lawsuits by unpaid interns challenging their status has abated significantly since the Second Circuit issued its decision in July 2015 announcing a new legal standard and rejecting the Department of Labor's "six factor" test, there was lingering doubt about whether the decision would stand given a long-pending petition by the plaintiffs for en banc review by the full court. In January 2016, the three-judge panel that issued the decision modified its opinion. While that unusual step signaled that en banc review would likely be denied, the issue stubbornly persisted for several weeks without resolution.
The court has now denied the plaintiffs' request. This means that the amended decision is now officially the "law of the land" in the Second Circuit. Unless the plaintiffs seek Supreme Court review and the Court accepts the case, this puts to bed any lingering employer concerns that the decision might be reversed.
As we have previously reported, the Glatt v. Fox Searchlight decision held that the "primary beneficiary" test governs whether unpaid interns are employees or trainees. The court also held that this test requires highly individualized inquiries—a conclusion that may deal a blow to plaintiffs' abilities to obtain class or collective certification in these cases. Although the court's amended decision made clear that the "primary beneficiary" applies only to intern cases, courts within the Second Circuit are still required to take a holistic view of an internship program, and the hurdles to class and collective certification remain in place.
In other intern-related news, an Indiana District Court dismissed the claims of former members of the University of Pennsylvania track and field team, who alleged that they were employees of the University under the FLSA and entitled to minimum wage for the time they spent as student athletes. The students argued that the question of whether student athletes are employees is governed by the DOL's internship factors. The court rejected this approach, finding that this test "was not designed to apply to student athletes" and that appellate courts have refused to adopt it, specifically citing Glatt. The court ultimately held that the economic realities of the student athletes' relationship with the University demonstrated that an employment relationship does not exist.
The DOL, for its part, recently ordered a venture capital firm in California to pay over $300,000 in back wages to former workers allegedly misclassified as unpaid interns. In a statement, the DOL's Wage and Hour Division said that the interns performed "high-level jobs," displaced regular employees, and performed duties that benefitted the firm directly. Given the intense focus by the DOL on alternative workplace arrangements, including unpaid interns, this order serves as a cautionary tale to all employers that the structure and operation of unpaid internship programs must be thoughtfully crafted and routinely monitored to ensure compliance with applicable law.
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