The Eleventh Circuit recently joined the Second Circuit in adopting the employer-friendly “primary beneficiary” test to determine whether unpaid interns are properly classified as employees under the FLSA.  The Second Circuit’s June decision in Glatt v. Fox Searchlight Pictures, Inc. struck the first blow in this area, and the Eleventh Circuit’s recent decision in Schumann v. Collier Anesthesia, P.A. provides employers with additional momentum in deterring future unpaid intern lawsuits.

The “Primary Beneficiary” Test

Under the “primary beneficiary” test, as adopted by both the Eleventh and Second Circuits, a court determines whether the employer or individual benefits more from the internship.  If the employer benefits more, he or she is properly classified as an “employee” entitled to minimum wage and overtime.  If the individual benefits more, they are properly classified as unpaid interns or trainees and exempted from the minimum wage and overtime requirements.

The 11th Circuit Case

The plaintiffs in Schumann were 25 former student registered nurse anesthetists (“SNRAs”) who were required to complete a minimum number of clinical hours in local anesthesiology practices for their Master’s Degree program and for professional licensure.  The SNRAs sued under the FLSA for unpaid wages and overtime, arguing that they worked as employees – rather than interns – during these clinical hours. While the 11th Circuit ultimately send the case back to the District Court to make this determination, it provided additional guidance for determining whether the employer or the individual is the “primary beneficiary.”

For one, the Court adopted the seven factors that the Second Circuit enunciated in Glatt for determining whether an individual is an employee or an intern.  The Court also recognized that discerning the primary beneficiary can be difficult when both the intern and the employer obtain significant benefits.  To resolve this potential quandary, the Court emphasized that the analysis should focus on two points: the benefits to the individual, and whether the manner in which the employer implements the internship program takes unfair advantage of or is otherwise abusive toward the individual.

The Court also cautioned that this inquiry is not an “all or nothing” approach – meaning, there could be a scenario in which the internship arrangement primarily benefits the student, but the employer also takes unfair advantage of the individual’s need to complete the internship.  The Court offered an illustrative example: an employer requiring an intern in a medical-related field to paint his house.  In such a scenario, the intern would not be considered an employee for work performed within the legitimate confines of the internship, but would qualify as an employee for hours spent painting the house.

Takeaways

As with the Second Circuit’s decision in Glatt, this case is a win for employers and will provide persuasive authority to other Circuits as they confront this issue.  As we cautioned in our previous post about Glatt, however, employers must continue to be cognizant of state labor laws and their enforcing agencies that may treat plaintiffs more favorably on this issue.