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Do You Need to Pay Your Student Interns?

September 17, 2015 Lisa Taylor
Student-asleep-e1444223557280.jpg

WARNING:  This blog post could lull you into a deep, deep sleep... Well, hopefully not, but the United States Court of Appeals for the Eleventh Circuit decided a case last week involving pay to student interns working as nurse anesthetists -- people who quite literally put others to sleep.  The witty Judge Rosenbaum, writing for the court, quipped in the opening lines of the opinion:  "Upon receiving their master’s degrees, certifications, and licenses, Plaintiff-Appellant student registered nurse anesthetists are legally able to put people to sleep. We have heard, though never ourselves experienced, that some legal opinions can do the same thing. We are hopeful that this one will not."  He then footnoted:  "But, then again, the writer is always the last to know."

What's good enough for Judge Rosenbaum and the Eleventh Circuit is surely good enough for this blog...thus the sleep joke as a lead-in to the heart of the matter, the court's decision rejecting the US Department of Labor's guidance on whether and when student interns are really "employees" entitled to a minimum wage under the federal Fair Labor Standards Act (FLSA).  And if you can get through this without falling asleep, please let us know.

The student-plaintiffs in the case worked 40 hours per week (and sometimes more) over the course of four semesters in an effort to fulfill the clinical requirements imposed by the state to obtain their degrees and eventually their licenses to become Certified Registered Nurse Anesthetists.  They sued under the FLSA (a tricky little devil of a statute, about which I recently blogged here), seeking compensation of at least a minimum wage for all the hours they had worked, plus a time-and-a-half premium for any hours worked in excess of 40 in any single workweek.

The defendants contended that the student interns were merely that -- interns, and not employees, who therefore had no entitlement to receive compensation for the work they performed.  Thus, the case as it came to the Eleventh Circuit boiled down to the perhaps-not-so-simple question:  were the student-interns "employees" within the meaning of the FLSA?  And more particularly, how should the court decide?

The plaintiffs vied for adoption of the US Department of Labor's approach, as articulated in its Field Operations Handbook.  That test calls for examination of the work performed in light of what is often called a "six-factor" test, but which really consists of six requirements, because all six characteristics must be found in order for the workers to be classified as interns who can legally work for no pay.  The factors generally call for evaluation of the circumstances and characteristics of the work to determine who benefits from it, but the kicker is really this one:  "The employer that provides the training derives no immediate advantage from the activities of the trainees or students, and on occasion his/her operations may actually be impeded."  In other words, if there is any benefit whatsoever to the employer, then the employer must pay the worker-interns.  And this is so even if the agreement is clear that the work is for no pay, and that it is integral to the degree program in which the students are enrolled.

Finding this approach inflexible and ill-suited to address the modern reality of professional-program internships, the court declined to adopt it.  Instead, the court pronounced a "primary beneficiary" test, calling for examination of the totality of the circumstances to ascertain whether the student benefits most from the opportunity, even if the employer also derives some advantage from the work performed.  The court explained:  "We think that the best way to [determine the primary beneficiary] is to focus on the benefits to the student while still considering whether the manner in which the employer implements the internship program takes unfair advantage of or is otherwise abusive towards the student."  The court then went on to essentially re-frame the DOL's factors to take account of modern internship arrangements, examining the nature of the internship and its relationship to the educational program, the effect of the interns' work on the employer's paid employees, and the understandings between the parties.

Are you still awake?  If so, then you've made it over the hump and are on the downhill side.  Now's when we try to answer the important question:  "What does all this mean?"

Well, if you are an enterprise that utilizes interns, you first need to determine whether this new decision affects you or not.  The Eleventh Circuit encompasses the states of Georgia, Florida and Alabama, so if you're in one of those states, you can assume for now that a court would apply this newer, more flexible "primary beneficiary" test, should your interns decide to sue.  And because the Eleventh Circuit here followed the lead of the Second Circuit (New York, Connecticut and Vermont) in rejecting the DOL's guidance in favor of the primary-beneficiary, totality-of-the-circumstances approach, companies in those locations can also assume this newer test applies.  Basically, this gives employers of interns in those states covered by the new rule a bit more breathing room when it comes to liabilities and obligations under the FLSA.

As for the rest of you, the jury is still out on this one.  Following the DOL guidance may be the safest best, though its rigid requirement that the employer obtain no benefit whatsoever from the intern's work may be difficult to achieve.  Perhaps we can look for the Supreme Court to take this up before long.  Until then, keep calm, and try to let your interns impede your productivity.

In FLSA, Overtime, Student Interns
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