On January 5, 2018, the Department of Labor endorsed a new test to determine what qualifies interns as employees under the Fair Labor Standards Act. This new test, also known as “primary beneficiary” test, or the Glatt test, focuses on the “economic reality” of the intern’s relationship to the employer and determines whether the intern or the employer derives the most benefit from the relationship. If the employer is the primary beneficiary, the intern must be paid minimum wage and overtime under the FLSA, but if the inverse is true, the intern may not receive compensation.
This primary beneficiary test was developed in Glatt v. Fox Search Light Pictures, Inc., a Second Circuit case from 2015. Former interns who worked as a production assistant and a bookkeeper on the Fox Searchlight film, Black Swan, filed a complaint against Fox Searchlight alleging violations of federal and New York labor laws for failing to pay them minimum wage and overtime. In that case, the court created a seven-factor list to aid in determining whether an intern should be classified as an employee under the FLSA. The seven-factor test for unpaid interns includes:
- The extent to which the intern and the employer clearly understand that there is no expectation of compensation. Any promise of compensation, express or implied, suggests that the intern is an employee—and vice versa.
- The extent to which the internship provides training that would be similar to that which would be given in an educational environment, including the clinical and other hands-on training provided by educational institutions.
- The extent to which the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit.
- The extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic calendar.
- The extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning.
- The extent to which the intern’s work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern.
- The extent to which the intern and the employer understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship.
Like the courts that have applied the Glatt test, the DOL similarly clarified that the seven factors constitute a non-exhaustive, flexible standard that should be used to aid courts in determining whether the intern or the employer is the primary beneficiary from the particular arrangement. Furthermore, the DOL echoed the findings of the courts applying the Glatt test by stating that each determination depends on the specific circumstances of each case.
In its press release, the DOL stated that the shift to the Glatt primary beneficiary test will provide the Division’s investigators with far greater flexibility than its previous six-factor test in analyzing internships on a case-by-case basis. The new test should also provide a more uniform and standardized analysis for employers going forward.
Amber Orr is an attorney at Berenzweig Leonard, LLP, a business law firm in the Washington, DC area. She can be reached [email protected].
Law clerk Lee Gleason is a 3L at the Antonin Scalia Law School, George Mason University School of Law.
 Glatt v. Fox Searchlight Pictures, Inc., 791 F.3d 376, 384 (2d. Cir. 2015).