The test for determining whether to classify workers as unpaid interns or paid employees is continuing to broaden, largely in favor of employers, as we reported here in July. In Schumann v. Collier Anesthesia, P.A., the United States Court of Appeals for the Eleventh Circuit rejected the Department of Labor’s rigid six-factor test and ordered the trial court to decide an intern case under the more relaxed “primary beneficiary test” that the Second Circuit recently adopted in the case of Glatt v. Fox Searchlight Pictures, Inc. Interestingly, the trial court had already ruled that the interns were properly classified as unpaid but they did so using the “old” test. Therefore, it seems likely that that the employer will prevail again but we may get additional clarity on how the new standard is to be applied.
Why Can’t Both Sides Benefit?
A central part of the “old” test was whether the company offering the internship received an “immediate benefit” from the interns. If the answer was yes, this often meant the intern must be paid as an employee. The Eleventh Circuit determined that this test was outmoded since unpaid intern programs of the past tended to be used to train a pool of potential employees for future work opportunities. Now, internships typically offer the chance for students to “learn on the job” and it is only natural that companies will receive some sort of immediate benefit from the added labor. This coincidental benefit, the Court explained, should not be the deciding factor.
The interns in Schumann were all student registered nurse anesthetists (SRNAs) currently enrolled in school. In Florida, all students must complete several hundred clinical hours to become a certified registered nurse anesthetist (CRNA). These particular students all went to the same private college and all completed their clinical hours with Collier Anesthesia, (“Collier”), a privately owned practice group. The interns argued that they should have been paid because Collier received a financial benefit by being able to serve more patients when SRNAs were scheduled. Collier disagreed, explaining that their internship program was set up with either a 1:1 or 2:1 ratio of SRNAs to CRNAs. The CRNA would supervise the intern, evaluate their daily performance, and provide instruction throughout their shift. This level of supervision often took additional time for the CRNAs and several reported that the interns actually caused a decrease in the overall efficiency of their work.
What, if any, benefit Collier received from the use of interns will be sorted out in the district court, but the Eleventh Circuit left no doubt that under the new primary beneficiary test, the central focus should be on the benefit that the internship affords to the students. As long as Collier is not taking unfair advantage of the students by making them perform tasks or work hours well beyond the clinical hour requirement, the court concluded that “the mere fact that an anesthesiology practice obtains benefits from offering SRNAs internships cannot, standing alone, render the student interns “employees” for purposes of the FLSA.”
Bottom Line:
Again, Collier probably will win this one and employers will get some relief if they utilize hands-on, “on the job” internship programs. As long as the program provides the intern with tangible benefits such as educational credits, experience, and training, the fact that the company also benefits will no longer preclude the intern’s status as unpaid. Remember, however, that these rulings are limited to the Second Circuit Court of Appeals (covering New York, Connecticut and Vermont) and the 11th Circuit (Florida, Alabama and Georgia). Minnesota employers can take heart from these developments but our Eighth Circuit still has yet to weigh in on this emerging trend.