The Fair Labor Standards Act requires all non-exempt employees to be paid at the federal minimum wage, and at time and one-half the wage rate for hours worked beyond 40 hours in any work week. I have written before about the risk employers take in violating that Act when they use unpaid summer interns. The Department of Labor issued guidance for employers which contains a six-part test to determine if an intern is to be paid. However, that test creates a narrow window for the use of unpaid interns.

In Glatt et al. v. Fox Searchlight Pictures, Inc. et al., the Second Circuit rejected the DOL’s test and created a more flexible one that might benefit employers and interns alike. The court adopted its own, non-exhaustive seven-part test. This test will enlarge the arena in which employers may engage unpaid summer interns, by adding a seventh criteria: The extent to which the intern and the employer understand that the internship is conducted without entitlement to a paid job.

However, I must issue a few words of caution. Obviously, the decision applies only within the Second Circuit, though it might have a persuasive effect elsewhere. Both tests are strongly tied to the educational experience of the intern. Internships that do not provide a strong educational experience and which displace other paid workers will not pass muster under either test. Employers must also consult state law, as some states, Connecticut, for example, have incorporated the DOL test into their laws and, even where that is not the case, employers should consult the definition of “employee” and case law interpreting that term under state wage payment laws.

For questions, comments or additional information, please contact Robert Small, Partner in our Employment Practice Group, at rsmall@regerlaw.com or via phone at 215.495.6541.