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Do You Have to Pay Interns as Employees? New Guidance from the Eleventh Circuit

The Eleventh Circuit recently evaluated whether interns are entitled to overtime under the Fair Labor Standards Act (“FLSA”). The plaintiffs in Schumann v. Collier Anesthesia, P.A., ___ F.3d ___, 2015 WL 5297260 (2015), were former student registered nurse anesthetists who brought a collective action against their college and the supervisor of a universal clinical-placement requirement necessary to obtain their degree, alleging they should have been paid minimum and overtime wages under the FLSA while working as interns. The District Court for the Middle District of Florida, applying the test provided in the Department of Labor’s Field Operation Handbook, determined that the students were not employees and granted summary judgment for the defendants. The plaintiff students appealed to the Eleventh Circuit.

In a very witty opinion written by Eleventh Circuit Judge Rosenbaum, the Eleventh Circuit provided guidance in the form of a new test adopted from the Second Circuit for considering whether interns qualify as employees. Specifically, the Eleventh Circuit declined to give deference to the test set out in the Department of Labor’s Field Operations Handbook (which is based on the seminal case involving whether trainees are employees from the United States Supreme Court, Walling v. Portland Terminal Co., 330 U.S. 148, 67 S.Ct. 639, 91 L.Ed. 809 (1947)), because an agency has no special competence or role in interpreting a judicial decision, the test is too rigid to fit into particular facts of all workplaces, and the decision does not reflect the role of internships in today’s economy.

Rather, the Eleventh Circuit opined that the important question in determining whether interns should be paid as employees is who is primarily benefited in the relationship where both the intern and the employer may benefit. This detemination should “focus on the benefits to the student while still considering whether the manner in which the employer implements the internship program takes unfair advantage of or is otherwise abusive toward the student,” which “allows for student internships to accomplish their important goals but still accounts for congressional concerns in enacting the FLSA.” The court adopted a non-exhaustive set of considerations for determining the primary beneficiary from the Second Circuit, including:

  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 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.

The Eleventh Circuit went on to caution district courts that “no one factor is dispositive and every factor need not point in the same direction for the court to conclude that the intern is not an employee;” instead the courts should weigh and balance all factors including, in some cases, circumstances not included in the seven factors. Interestingly, the Eleventh Circuit also hypothesized that there could be situations whether an intern, in some respects and duties, qualifies as an employee and should be compensated and in other respects should not. The Court did not decide whether the plaintiff students were employees and remanded the case to the district court for consideration in light of the opinion.

This decision is important because it provides guidance to employers in determining whether interns are employees and thus entitled to compensation under the FLSA; however, the new test is amorphous enough to still cause headaches and uncertainty on the issue. An employer who hires interns would be well advised to spend some time evaluating its program under the factors identified by the Eleventh Circuit and the Department of Labor and consult with legal counsel to confirm compliance with the FLSA.

The attorneys at Buckley Christopher & Haff, P.C. are available to advise and assist you in ensuring compliance with federal and Georgia employment laws.

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