IMG_7496 (2)Did you enjoy the fireworks last week?

I’m not talking about the real Independence Day fireworks; rather, it’s a new Second Circuit decision that should have employment lawyers popping this morning.

For a while, we’ve been talking about interns.  Indeed, back in 2013, I talked about how a wage/hour case involving interns on the movie “Black Swan” had the potential to change how employers use interns.

In that case, a federal district court judge essentially adopted a six-factor test used by the U.S. Department of Labor to determine if an intern was really an employee.

Flash forward to last Thursday.  In somewhat of a surprise, the Second Circuit — which covers cases in Connecticut — reversed that federal district court court’s decision and rejected the DOL’s six-factor approach.

In its place, the court adopted what Jon Hyman properly termed, a “more flexible and nuanced primary-benefit test.”

[T]he proper question is whether the intern or the employer is the primary beneficiary of the relationship. The primary beneficiary test has two salient features. First, it focuses on what the intern receives in exchange for his work.… Second, it also accords courts the flexibility to examine the economic reality as it exists between the intern and the employer.…

In the context of unpaid internships we think a non‐exhaustive set of considerations should include:

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 court went on to explain its rationale accordingly:

The approach we adopt … reflects a central feature of the modern internship—the relationship between the internship and the intern’s formal education. The purpose of a bona‐fide internship is to integrate classroom learning with practical skill development in a real‐world setting…. By focusing on the educational aspects of the internship, our approach better reflects the role of internships in today’s economy than the DOL factors, which were derived from a 68‐year old Supreme Court decision that dealt with a single training course offered to prospective railroad brakemen.

It summed up its decision as follows:

In sum, we agree with the defendants that the proper question is whether the intern or the employer is the primary beneficiary of the relationship, and we propose the above list of non‐exhaustive factors to aid courts in answering that question.

The case now gets sent back to the district court to re-evaluate the facts of the case based on this new test.

But this will not end the story in Connecticut.

As I pointed out last month, the U.S. Department of Labor’s test has just been essentially written into law by the Connecticut legislature. As I’ve noted in prior posts here and here, the General Assembly granted anti-discrimination protections for interns if those interns meet several criteria.

In this new law, an intern is defined as an “individual who performs work for an employer for the purpose of training, provided”:

  • the employer is not committed to hire the individual performing the work at the conclusion of the training period;
  • the employer and the individual performing the work agree that the individual performing the work is not entitled to wages for the work performed; and
  • the work performed:supplements training given in an educational environment that may enhance the employability of the individual,
    • provides experience for the benefit of the individual,
    • does not displace any employee of the employer,
    • is performed under the supervision of the employer or an employee of the employer, and
    • provides no immediate advantage to the employer providing the training and may occasionally impede the operations of the employer.

Just two weeks ago, I noted that at least the Connecticut law appeared to be consistent with federal interpretation.

But now, that’s completely out the window.  There is no reference to “primary beneficiary” in this new Connecticut law.

What this means is that we now have a mess on our hands.   Someone may be an “intern” under federal law or state law, but not both.

And that’s a problem waiting for a new solution.