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2nd Circuit Quashes Unpaid Intern Suit With "Primary Beneficiary" Test

In a setback for interns, the US Court of Appeals for the Second Circuit gave a green light to employers to use unpaid interns with considerable leeway and little legal ramifications . . . as long as the employer can prove the intern is receiving an educational benefit from the "employment relationship."

Out With the Old

Federal District Court Judge William H. Pauley III originally opened the courtroom docket to claims by uncompensated interns when he certified this class action case against Fox Searchlight Pictures.

Eric Glatt and Alexander Footman interned on the set of “Black Swan” between 2009 and 2010, where their duties involved:

  • Copying documents
  • Maintaining takeout menus
  • Assembling furniture
  • Taking out the trash
  • Finding a non-allergenic pillow for the movie’s director, Darren Aronofsky.

District Court Judge Pauley cited a set of six criteria by the Labor Department in 2010 to decide that Fox’s interns did not meet the standard to work without pay. The DOL’s criteria indicates that, to qualify as an unpaid internship, the work must, among other things:

  • Be similar to training offered in a school setting,
  • Be performed for the benefit of the intern rather than the employer, and
  • Not displace aside the work of other regular employees while working under the close supervision of existing staff.

Additionally, under the DOL test the employer must give training that derives to immediate advantage from the activities of the intern; the employer’s own operations should actually be impeded on certain occasions.

In With the New

The appeals court vacated Judge Pauley’s decision, ruling that the Labor Department’s criteria for determining whether a worker should be classified as an employee and not an unpaid intern were both out of date and not binding on federal courts. Judge John M. Walker Jr., sitting on a three-judge panel, decided the proper way to decide the workers’ status was to apply a “primary beneficiary test” – a concept actually proposed by Fox Searchlight.

Under this new, the worker can be considered an employee only if the employer benefits more from the relationship than the intern.

The appeals court agreed with Fox that the test should hinge largely on the internship’s educational benefits: for example, whether the internship was tied to the intern’s formal schooling and whether it occurred in an educational setting. Fox said:

“We are very pleased with the ruling, but the real winners are students. Fox has always been proud of its internships programs and continues to believe they offer tremendous benefits to those who participate in them.”

Procuring the finest of non-allergenic pillows is seemingly an invaluable tool for Fox, but it is not likely the interns will be able to add such skills to their resumes.

Realistically, the interns are still likely to prevail on remand to the lower court because neither Glatt nor Footman was enrolled in an educational institution at the time of their internships.

This opinion, regardless of the outcome, raises the bar much higher for future interns seeking to bring claims against employers. Interns seeking to bring a class action lawsuit against employers will be even further impeded by the Second Circuit’s new primary benefits test, which is much more likely to be applied individual by individual.

The case is Glatt, et al. v. Fox Searchlight Pictures, Inc., et al. (Case Nos. 13‐4478‐cv, 13‐4481‐cv) in the United States Court of Appeals for the Second Circuit.

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