Employment Law Daily Intern’s claimed job-related benefits were not significant enough to satisfy ‘threshold-remuneration’ test for employee status
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Thursday, March 28, 2019

Intern’s claimed job-related benefits were not significant enough to satisfy ‘threshold-remuneration’ test for employee status

By Ronald Miller, J.D.

In an internship setting, job-related benefits such as access to professional certification and/or a path to employment were not significant enough to satisfy the Tenth Circuit’s “threshold-remuneration” test because they were too attenuated and speculative.

Based on the facts alleged in an intern’s discrimination complaint, the Tenth Circuit concluded that the benefits she claimed from her internship were too attenuated and speculative to constitute sufficient remuneration for purposes of the court’s threshold remuneration test. The appeals court observed that the claimed benefits were not provided directly by the hospital sponsoring the internship, and they did not resemble traditional employment benefits. Further, the claimed benefits could only be realized if subsequent events occurred independently of the internship relationship. Accordingly, a district court’s judgment that the plaintiff was not an employee protected under the anti-discrimination statutes was affirmed (Sacchi v. IHC Health Services, Inc., March 26, 2019, Kelly, P., Jr.).

The intern and plaintiff here was pursuing her master’s degree in early childhood education, and the Child Life Council requires that applicants for certification complete 480 hours in an internship with an approved institution. She obtained an unpaid internship with IHC Health Services, which originally was scheduled to last from August 26, 2015, to December 15, 2015. However, the internship was terminated on November 3, before it was scheduled to finish, by the hospital’s Director of Child Life.

Discrimination claims. The intern filed suit alleging: (1) associational discrimination and retaliation under the ADA, (2) sex and religious discrimination under Title VII, (3) age discrimination under the ADEA, (4) breach of contract, and (5) defamation against the director. Her complaint alleged that the director and hospital knew that the plaintiff’s father had a disability, that she was a single mother and not a member of the LDS church, and that she was over 40 years of age.

Relevant here, the intern received no direct payment or other benefits for her work as an intern. However, she alleged that the internship would provide other benefits: Namely, it would allow her to satisfy the internship requirement to be certified a child life specialist and that it would provide a pathway to employment. To be certified as a child life specialist, she was required to satisfy three requirements: (1) complete an educational component, (2) complete 480 hours of clinical training, and (3) pass a certification exam. The hospital’s program was accredited and recognized.

The district court dismissed the intern’s federal claims because it concluded that she had not alleged facts sufficient to qualify as an employee for purposes of the ADA, ADEA, and Title VII, and so did not fall within those statutes’ protections.

“Threshold-remuneration” test. As an initial matter, the Tenth Circuit examined whether the intern’s complaint established that she was plausibly an “employee” within the meaning of Title VII, the ADA and the ADEA. In each of these Acts, “employee” is defined as “an individual employed by an(y) employer.” Typically, the appeals court relies on a common law test that invokes agency principles to determine whether a person is an employee for purposes of the employment discrimination statutes. When a person is unpaid, however, the court asks whether the person receives sufficient remuneration to even proceed to the common law analysis—the so-called “threshold-remuneration test.”

Substantial, significant, and not incidental benefits. In general, to satisfy the test, the plaintiff must receive direct remuneration or indirect benefits that are substantial or significant and not incidentally related to advancing the purpose of the putative employer. But here, the intern’s relationship with the hospital failed to satisfy the threshold-remuneration test as a matter of law for two reasons. First, the claimed benefits were not provided directly by the hospital, and they did not resemble traditional employment benefits. Second, the claimed benefits were attenuated: They could only be realized if subsequent events occurred independently of the internship relationship, the appeals court reasoned.

Merely because others had obtained positions after unpaid internships did not constitute a substantial or significant indirect benefit. Thus, the intern’s claimed benefits were too attenuated and conditional to constitute substantial indirect benefits. The benefits she claimed were follow-on benefits that did not come into existence immediately as a result of the internship.

Unpaid interns not “employees” under antidiscrimination statutes. In the alternative, the appeals court also declined to hold that most unpaid interns are “employees” under federal antidiscrimination statutes. It observed that this is a task for Congress. Moreover, the court was not inclined to establish a broader rule than necessary to decide the case before it.

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