Several former interns of the Hearst Corporation, one of the world’s largest magazine publishers, were just that: unpaid interns, not employees entitled to minimum wage or overtime under the FLSA, the Second Circuit has held.  Wang v. Hearst Corp., 2017 U.S. App. LEXIS 24789 (2nd Cir. Dec. 8, 2017).  The Second Circuit has jurisdiction over New York, Connecticut and Vermont.

Each of the five plaintiffs worked at one of Hearst’s magazines in an unpaid internship.  It was undisputed that there was no promise or other expectation of compensation during or subsequent full-time employment following these internships, and each internship required its participants to receive pre-approval for college credit, although ultimately not all of the plaintiffs received such credit.  Each of the plaintiffs also admitted that as part of their internship, they performed tasks and gained valuable experience related to their professional pursuits, primarily in the journalism or fashion industries, but argued many of the tasks they performed were menial, did not advance their degrees and displaced the work of paid employees.

In concluding that the summary judgment record established that these individuals were indeed interns and not employees, the Court of Appeals reviewed the “totality of the circumstances” of the plaintiffs’ internships, in light of the multi-factor analysis it set forth last year in Glatt v. Fox Searchlight Pictures, Inc., 811 F.3d 528 (2d Cir. 2016).  Those non-exhaustive factors include:

(1)        the extent to which the intern and employer clearly understand that there is no expectation of compensation;

(2)        the extent to which the internship provides training similar to that given in an education environment, including clinical or other hands-on training;

(3)        the extent to which the internship is tied to the intern’s formal education program through integrated coursework or credit;

(4)        the extent to which the internship accommodates the intern’s academic calendar;

(5)        the extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning;

(6)        the extent to which the intern’s work complements, rather than displaces, that of paid employees; and

(7)        the extent to which the intern and employer understand that there is no entitlement to employment following the internship.

In Wang, Factors 1 and 7 were not in dispute.  Noting that its opinion in Glatt expressly included vocational benefits and “practical skill development in a real-world setting,” the Court of Appeals rejected the plaintiffs’ argument that the internship was not in an “education environment” as set forth in Factor 2, as well as the plaintiffs’ argument that because they already possessed some of the skills they used during the internship, they were not receiving “beneficial” learning, as required by Factor 5.  As to Factor 3, the internships of all but one of the plaintiffs occurred around, and in coordination with, their academic calendars, and the remaining plaintiff intentionally postponed beginning graduate school to undertake the internship following college graduation.  That the internship included a requirement to earn credit “generally is more telling than whether credit was actually rewarded in that individual’s case,” noted the Second Circuit.  Similarly, with respect to Factor 4, the Court of Appeals noted that Hearst accommodated the plaintiffs’ academic schedules when such a schedule existed.

Finally, as to Factor 6, the Court of Appeals agreed that the fact the interns completed some work otherwise performed by paid employees weighed in their favor but noted that this factor is not dispositive.  Reiterating its rejection in Glatt of the DOL’s position that conferral of tangible benefits on the employer mandates the finding of an employer-employee relationship, the Second Circuit added that “[it] is no longer a problem [in classifying an individual as an intern] that an intern was useful or productive.”

Wang provides further practical guidance to employers who have implemented, or are contemplating the implementation of, an internship program, and the potential for such interns to be deemed employees entitled to FLSA protections.  Those fashioning unpaid internship programs should benchmark them against this and other appellate guidance.