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Second Circuit Amends Fox Searchlight Decision on Unpaid Internships
Practical Law Legal Update w-001-3948 (Approx. 5 pages)
Second Circuit Amends Fox Searchlight Decision on Unpaid Internships
by Practical Law Labor & Employment
| Published on 01 Feb 2016 • USA (National/Federal) |
The Second Circuit issued an amended decision in Glatt v. Fox Searchlight Pictures, Inc. on unpaid internships.
On January 25, 2016, the US Court of Appeals for the Second Circuit amended its July 2015 decision in Glatt v. Fox Searchlight Pictures, Inc. The amended decision:
- Maintains the primary beneficiary test to determine whether an unpaid intern is an employee under the FLSA.
- Differs from the original decision by holding that the analysis of whether the intern or the employer is the primary beneficiary of the working relationship is context-specific and focuses on the internship program as a whole, rather than each individual intern's experience.
( (Jan. 25, 2016).)
Background
In its original decision issued in July 2015, the Second Circuit:
- Vacated the district court's grant of partial summary judgment to three students who:
- worked as unpaid interns for the film studio Fox Searchlight;
- claimed they were employees under the FLSA and New York law; and
- sued Fox for unpaid wages and overtime.
- Rejected the DOL's six-factor test that focuses on whether the employer receives an immediate advantage from the interns' work.
- Held in a matter of first impression in the circuit that:
- the correct test for unpaid intern status focuses on which party, the employer or the intern, is the primary beneficiary of the working relationship;
- the primary beneficiary inquiry involves two "salient features" – what the intern receives in return for his work and the economic reality that exists between the intern and the employer; and
- the primary beneficiary determination involves seven, non-exhaustive, non-dispositive considerations.
Outcome
On rehearing, the panel upheld its July 2015 decision to vacate class certification and partial summary judgment for the class, but made significant changes to its original decision by:
- Adding as a third "salient feature" to the primary beneficiary analysis the fact that interns enter the relationship expecting an educational or vocational component that is generally not present in a traditional employment relationship.
- Confirming that the intern analysis is context-specific, focusing on the internship program as a whole, rather than an individualized analysis of each intern's experience.
- Confirming that the touchstone of the primary beneficiary analysis the court announced in July is economic reality.
- Limiting its decision to internships, not training programs in other contexts.
Practical Implications
An en banc appeal of the Second Circuit panel's decision is still pending, but if courts follow the Glatt decision and evaluate internship programs as a whole, rather than the subjective experience of individual interns, employers in the Second Circuit may find it easier to satisfy the primary beneficiary test.
Employers in every circuit still need to:
- Carefully evaluate the terms of any paid or unpaid internship programs.
- Regularly review their internship programs for compliance with the FLSA and state wage and hour requirements.