Second Circuit Leaves Interns in the Cold—Again

by Seyfarth Shaw LLP
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While most New Yorkers rode out last weekend’s blizzard by binge watching television or enjoying playoff football, three Second Circuit judges apparently spent their time more productively, as the court on Monday issued an amended decision in its landmark ruling from last summer on unpaid internships.

As we have previously reported, the court’s July 2015 decision in Glatt v. Fox Searchlight held that held that the “primary beneficiary” test should be used to decide whether unpaid interns should be deemed 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.

In its amended decision, the Court added a third “salient feature” to the primary beneficiary test, holding that the “intern-employer relationship should not be analyzed in the same manner as the standard employer-employee relationship because the intern enters into the relations with the expectation of receiving educational or vocational benefits that are not necessarily expected with all forms of employment.” The court also inserted a statement that its analysis of the intern v. trainee question is limited to internships and not to “training programs in other contexts.”

Later in the amended opinion, after the listing of the seven non-exhaustive factors that determine the “primary beneficiary” of an internship, the court noted that the “touchstone” of its analysis was the economic reality of the relationship. In light of this, the court said, it is relevant to consider evidence “about an internship program as a whole rather than the experience of a specific intern.” This is an important addition because it may render the specific experiences of a named plaintiff less important in the overall “primary beneficiary” analysis and make it easier for an employer to satisfy the test even if a particular manager did not administer a compliant program.

The court also modified its analysis of the previously vacated Rule 23 claims under New York law. It deleted the prior reference to “individualized” inquiries driving the denial of class certification, and replaced it with “highly context-specific” inquiries regarding an internship program as the barrier to a finding of commonality. The holding now reads as follows: “[T]he question of an intern’s employment status is a highly context-specific inquiry. [E]vidence that the defendants received an immediate advantage from the internship program will not help to answer whether the internship program could be tied to an education program, whether and what type of training the internship program provided, whether the internship program continued beyond the primary period of learning, or the many other questions that are relevant in this case.”

After the court issued its first decision in Glatt last July, the plaintiffs filed a petition for en banc review. Despite the denial of en banc review in Wang v. Hearst Corp., the companion case involving Hearst interns, the Glatt petition has remained pending. We suspect that this amended opinion reflects a compromise by the court’s judges to avoid a potentially contentious review by the full court. We now expect a decision on the en banc petition to be issued soon.

Although the court has now revised the “primary beneficiary” to apply only to intern cases, the Glatt decision still has broad implications for employers that use unpaid interns. In particular, 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. As always, however, employers should conduct a careful analysis of their internship programs to ensure full compliance with any wage and hour obligations and protect themselves from future litigation.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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