Wednesday, January 21, 2015

Corporate Counsel Section: Eleventh Circuit to Revisit Interns’ FLSA Status

By Deborah C. Brown

Companies offering internships have recently been confronted with whether unpaid interns are “employees” entitled to minimum wage and overtime under the Fair Labor Standards Act (FLSA). 29 U.S.C. § 201, et seq. The FLSA does not clearly define employee status, but the U.S. Department of Labor (DOL) excludes interns from coverage when certain criteria are met. Those criteria are: (i) The internship, even though including actual operation of the employer’s facilities, is similar to training in an education environment; (ii) the internship experience is for the intern’s benefit; (iii) the intern does not displace regular employees but works under existing staff’s direct supervision; (iv) the employer providing training derives no immediate advantage of the intern’s activities, and on occasions its operations may actually be impeded; (v) the intern is not necessarily entitled to a job at the internship’s conclusion; and (vi) the employer and intern understand the intern is not entitled to wages for the internship. Fact Sheet #71: Internship Programs Under The Fair Labor Standards Act (April 2010). 

These factors’ significance is subject to debate. The Eleventh Circuit describes these factors as “a body of experience and informed judgment to which courts and litigants may properly resort for guidance.” Kaplan v. Code Blue Billing & Coding, Inc., 504 F. Appx 831, 835 (2013), cert. denied, 134 S. Ct. 618 (2013). They have been relied upon when disposing of intern claims. Demayo v. Palms West Hosp., Ltd. P'ship, 918 F. Supp. 2d 1287 (S.D. Fla. 2013); Schumann v. Collier Anesthesia, P.A., 2014 WL 2158505 (M.D. Fla. May 23, 2014). But other circuits have been less deferential to the DOL. Solis v. Laurelbrook Sanitarium & School, 642 F.3d 518 (6th Cir. 2011) (rejecting DOL factors in favor of “primary benefit” analysis). Thus, the level of DOL deference, how much weight each factor receives, and whether all factors must be met are unclear among federal appellate courts. 

That issue is now before the Eleventh Circuit on appeal in Schumann, which involves a suit by interns in a clinical training program supervised by Collier Anesthesia but part of Wolford College’s nurse anesthesia master’s degree program. Schumann’s significance stems from use of the DOL factors without it being necessary to resolve each in the defendants’ favor. Rather, by using the factors to determine whether the economic realities supported finding an employment relationship, a defense summary judgment was granted even though only three factors were conclusively established for the defendants. 

Private companies using unpaid interns should examine the academic nature of their intern activities, the onsite supervisor’s role, whether academic credit/other benefits are given to interns, and how to best create a qualifying mutually beneficial relationship. Greater risk exists in programs without educational institution support to formulate the academic components. But governmental/nonprofit internships have been unaffected because they operate under an FLSA exclusion for volunteers. 29 U.S.C. § 203(e)(4); Hill v. Watson, Feb. 4, 2014 WL 440371, n.1 (N.D. Ill. 2014); WH Op. Ltr. FLSA2008-14 (Dec. 18, 2008). With proper structure and oversight, private internships can remain viable, too.