Employment Law Daily Second Circuit finds trial court got Glatt right; magazine interns reap educational benefits, not pay
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Monday, December 11, 2017

Second Circuit finds trial court got Glatt right; magazine interns reap educational benefits, not pay

By Lisa Milam-Perez, J.D.

Unpaid Hearst Corp. magazine interns were not statutory employees under the Second Circuit’s Glatt test for determining whether individuals are “bona fide” interns or workers entitled to compensation under the FLSA, the Second Circuit held, affirming summary judgment in favor of the media company in one of the bellwether wage suits brought by interns seeking compensation beyond simply college credit. The appeals court rejected the notion, supported by several amicus briefs in the case, that the interns’ status should not have been resolved on summary judgment when there were contested facts related to the quality of the interns’ experience. There were enough facts not in dispute for the lower court to decide the interns’ status as a matter of law (Wang v. The Hearst Corp., December 8, 2017, Jacobs, D.).

Internship program. The remaining appellants in this case, all of whom had an interest in fashion or writing, had been participants in one of the dozens of unpaid, for-credit internship programs that Hearst maintains at its various magazines. The internships came with no expectation of potential full-time employment, and none of the appellants claim to have been promised otherwise. The interns acknowledged that they performed a range of tasks related to their professional aspirations and gained valuable knowledge and skills. However, many of the assigned tasks were menial and repetitive, they contended—they mastered them within a few weeks, and spent the remainder of their internships performing the same duties—and the program offered little in the way of guidance or formal training, as compared to their in-class academic experiences.

A test case. In one of the early cases seeking to challenge the “trainee” status of unpaid interns, they filed suit, asserting they were employees under the FLSA and New York Labor Law (NYLL) and should have been compensated accordingly. Their claims were conditionally certified as a collective action, but the court denied their subsequent motion to certify a Rule 23 NYLL class. The court also denied their motion for partial summary judgment on the issue of whether they were employees. The Second Circuit took an interlocutory appeal and, in Glatt v. Fox Searchlight Pictures, Inc., decided in tandem with the instant case, adopted its “primary beneficiary” standard for determining when, in the context of unpaid internships, an individual is a “bona fide” intern or a statutory employee.

Primary beneficiary test. The Glatt test set forth seven non-exhaustive factors: (1) whether it is clearly understood there is no expectation of pay; (2) whether the internship provides formal training similar to what might be provided in an educational environment; (3) whether it is tied to a formal educational program or earns academic credit; (4) whether the internship period corresponds to the intern’s academic calendar and accommodates the intern’s academic commitments and is (5) limited in duration to the period in which the internship provides beneficial learning; (6) whether the intern’s work complements, rather than displaces, the work performed by paid employees and simultaneously providing a significant educational benefit to the intern; and (7) whether it is clearly understood that the intern is not entitled to a paid position after the internship concludes. Courts are to take a “totality of the circumstances” approach; none of the factors alone are dispositive. Applying the newly minted standard on remand, the district court found that all but one of the factors weighed in Hearst’s favor or were neutral, and ruled that the magazine interns were not statutory employees as a matter of law.

No expectations, no abuse. The interns conceded they were given no expectation of compensation for their efforts, or a promise of employment at the end of their internship program; however, on appeal, they took aim at the very use of these factors, arguing they should be of little consequence since their rights under the FLSA cannot be waived. However, these factors are critical to an “economic reality” analysis, the appeals court said. When an internship program is unambiguously described as an unpaid internship for students, and students knowingly apply for that internship, “the relationship is far less likely to take on an abusive quality.”

Training. At the thick of the dispute was the interns’ contention that the district court had misapplied Glatt by improperly broadening the meaning of “training” to include practical skills. For example, the lower court noted that one intern sat in on marketing meetings, but the appellants argued he was simply assigned to take minutes. Another intern was said to have “learned about photo shoots,” but she already knew how to use a camera, the interns argued. But this would restrain the meaning of training under the Glatt test “to education that resembles university pedagogy to the exclusion of tasks that apply specific skills to the professional environment,” the appeals court countered. “The appellants’ tacit assumption is that professions, trades, and arts are or should be just like school; but many useful internships are designed to correct that impression.”

Relatedly, the Glatt test demands that a bona fide internship program provide “beneficial learning” for the duration of the internship program, the interns argued that after a few weeks, they were simply doing the same repetitive tasks, and learning nothing new. But “practical skill may entail practice, and an intern gains familiarity with an industry by day to day professional experience.”

Integration into academic program. Hearst internship candidates had to obtain prior approval for college credit from an accredited university before they could participate. Each intern received pre-approval, but not all received college credit. For example, one intern entered the program after finishing her undergraduate degree in fashion and deferred her start date for graduate school so she could gain professional experience through a full-time Hearst internship. That she did not receive college credit (because she did not pursue college credit) did not sever the connection between her internship and her formal education, though; her internship was still tied to her formal education. To the court, it was more telling that the program required participants to secure approval for academic credit than whether academic credit is actually awarded in any given case.

Interns can confer some benefit. Because the interns did some work that was regularly performed by paid employees, the district court had correctly held the “displacement” factor favored the interns. But this factor alone was not dispositive, the Second Circuit reiterated. Interns can perform complementary tasks that might confer benefits on the company, and that’s OK under Glatt—which quite intentionally disavowed the DOL’s position that a putative employer can derive no immediate advantage from an intern’s activities. “It is no longer a problem that an intern was useful or productive.”

Some disputed facts can remain. The AFL-CIO and several unions, worker advocacy groups, and university professors filed amicus briefs in support of the interns, arguing that certain Glatt factors support an inference in Hearst’s favor while others permitted inferences that favored particular interns. Because the cases are “fact specific” and require a case-by-case analysis, their employment status should not have been resolved on summary judgment, they asserted. But one’s status as a statutory employee is a matter of law, and the summary judgment standard permits a district court to “strike a balance on the totality of the circumstances to rule for one side or the other.” While it was true there were contested issues bearing on the quality of each intern’s experience, “[t]he crucial point is that a district court may rule on summary judgment if it can weigh the Glatt factors on the basis of facts that are not in dispute.” Such was the case here, the appeals court found, affirming summary judgment in Hearst’s favor.

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