Another Appeals Court Criticizes the Labor Department’s 6-Factor Intern Test

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Sep 15, 2015

By Eric B. Meyer

Earlier this Summer, I blogged here about a decision by the New York-based Second U.S. Circuit Court of Appeals in which the appellate court criticized the U.S. Department of Labor’s six-factor test for determining when to pay an intern.

On Friday, the Eleventh U.S. Circuit Court of Appeals in Atlanta doubled down and threw more shade at the Labor Department’s intern test.

You see, the Labor Department’s six-factor test derives from a 1947 Supreme Court decision called Walling v. Portland Terminal. And the appellate court concluded that they are quite different:

Portland Terminal is nearly seven decades old and, in our view, addresses a very different factual situation involving a seven-or-eight-day, railroad-yard-brakeman training program offered by a specific company for the purpose of creating a labor pool for its own future use. This case, however, concerns a universal clinical-placement requirement necessary to obtain a generally applicable advanced academic degree and professional certification and licensure in the field.

So, while we follow Portland Terminal’s “primary beneficiary” test here, we do not believe that measuring the facts in this case by a strict comparison to those in Portland Terminal allows us to identify the primary beneficiary of a modern-day internship for academic credit and professional certification. As a result, we now adopt an application of Portland Terminal’s “primary beneficiary” test specifically tailored to account for the unique qualities of the type of internship at issue in this case.”

Instead, it’s the “primary beneficiary” test

This “primary beneficiary” test requires a court to flexibly consider at least seven (7) factors. The court further recognized a possible hybrid arrangement. That is, in certain situations, an internship could require payment for some tasks, while the balance of the internship remains unpaid:

For example, in the context of an internship required for an academic degree and professional licensure and certification in a medical field, consider an employer who requires an intern to paint the employer’s house in order for the student to complete an internship of which the student was otherwise the primary beneficiary.

Under those circumstances, the student would not constitute an “employee” for work performed within the legitimate confines of the internship but could qualify as an “employee” for all hours expended in painting the house, a task so far beyond the pale of the contemplated internship that it clearly did not serve to further the goals of the internship.

What’s an employer to do?

If you operate within the jurisdiction of either the Second or Eleventh Circuits, you can disregard the Labor Department test, at least as applied to Fair Labor Standards Act claims. (State-law wage-and-hour claims are a different story).

Elsewhere, the safe move is to stick with the Department of Labor factors until an appellate court dictates otherwise.

But, above all, as with other sticky wage-and-hour issues, consult an employment lawyer.

This was originally published on Eric B. Meyer’s blog, The Employer Handbook.