August 30, 2016; Lexology

In 2013, NPQ reported on Glatt v. Fox Searchlight Pictures, also referred to as the “Black Swan” decision, which found that some unpaid interns were indeed employees and entitled to pay and benefits because their employer had not conducted a formal internship program using New York and U.S. Department of Labor regulations as a guide.

However, in 2015, the Second Circuit Court of Appeals vacated the District Court’s Glatt decision and established a new test, slightly different from the federal and New York State standards, for evaluating the legality of unpaid internships. On August 24th, a federal court in New York used this different test to dismiss an unpaid intern lawsuit against the Hearst Corporation. While the cases only affect the U.S. Second Judicial Circuit (New York, Connecticut, and Vermont), they are closely watched because no similar cases have yet been raised elsewhere in the country.

The new standard replaces the six-point Department of Labor (DOL) test with a seven-point “primary beneficiary” test that is more favorable to employers:

  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 an intern is an employee—and vice versa
  2. The extent to which the internship provides training 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 commitment by corresponding to the academic calendar
  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

Traditionally, the DOL has granted leeway for nonprofit organizations in applying its standards. It’s unclear whether the new standards developed in the Second Circuit will allow for similar leeway. Regardless, it’s chilling to note that the Department of Labor is “reviewing the need for additional guidance” on nonprofit internships.

As NPQ has noted, unpaid internships as educational opportunities are often family-supported, meaning that unpaid interns often come from more affluent families that can afford to support their student’s living expenses.

Four takeaways identified in the Lexology article include: Require academic credit from the intern’s educational institution; design employer-provided educational sessions for interns; limit menial tasks performed by interns; and limit the duration of internships.

Legally speaking, an internship requires evidence of a partnership between an employer and an educational institution willing to provide academic credit for an intern’s successful participation. The intern does not expect cash payment but receives compensation in the form of a meaningful learning experience through the internship, not just a chance to hang out at an employer’s workplace while filing, copying, and cleaning.

Internships are not intended to supplant an employee’s paid labor. Instead, they are a way for employers to give back to their communities and their industries by providing help to aspiring educated workers. For nonprofit organizations, seeing internships in this way might help inspire the redesign of many existing programs.—Michael Wyland