Second Circuit Takes Firm Stance On Educational Value Of Being Poor
The Second Circuit takes the war to unpaid interns. Poor kids never had a chance.
It was touch and go there for a minute. In a nation with stagnant real wages and persistent underemployment, the Southern District of New York had the audacity to suggest that multimillionaires could not skirt decades of labor regulation by reclassifying entry-level drones as “interns” and profiting from free labor. The nerve of some life-tenured judges! Thankfully, the Second Circuit rectified this egregious slight with a wholesale rewrite of labor law to fit the whims of business. Huzzah!
Was this opinion really this bad? To quote Reverend Lovejoy, “short answer, ‘yes’ with an ‘if’ — Long answer, ‘no’ with a ‘but.'” Oh yeah. That said, it wasn’t bad for the reasons some are kvetching about. Much is being made in the media of the Second Circuit tossing the Department of Labor’s long-standing “six factor” test to define internships, which certainly sounds like a major event, but ultimately that part of the Second Circuit opinion is simply style over substance.
It’s the rest of the opinion that drops an anvil on interns. And it does it with style!
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Let’s dispense with the noise first. In the original opinion by Judge Pauley, he applied a balancing test based upon the six factors articulated by the Department of Labor to define an acceptable unpaid internship.
1. The internship, even though it includes actual operation of the facilities of the employer, is similar to training which would be given in an educational environment;
2. The internship experience is for the benefit of the intern;
3. The intern does not displace regular employees, but works under close supervision of existing staff;
4. The employer that provides the training derives no immediate advantage from the activities of the intern; and on occasion its operations may actually be impeded;
5. The intern is not necessarily entitled to a job at the conclusion of the internship; and
6. The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.
Judge Pauley found that some standards weighed in favor of the studio, while others cut in favor of the interns. Ultimately, the “totality of the circumstances” favored the plaintiffs. But since multimillionaires cannot f**king stand the possibility of paying minimum wage, they decided to blow much more money appealing the decision.
On appeal, the DOL — stupidly — argued that Judge Pauley was wrong to apply a balancing test and that all those factors must cut in favor of the studio to warrant an unpaid internship. The crux of the dispute between Labor and Judge Pauley is in interpreting this line:
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The determination of whether an internship or training program meets this exclusion depends upon all of the facts and circumstances of each such program.
Does “depends upon all” mean that all must be considered and weighed, as Judge Pauley determined, or that all these factors must be present? It certainly sounds like it invites consideration of the “totality of the circumstances.”
But the Second Circuit decided to mete out a Pyrrhic victory for the Department of Labor. According to the panel of Judges Walker, Jacobs, and Wesley, Judge Pauley was wrong to interpret the Labor rules as a balancing test… because Labor’s rules shouldn’t apply in the first place. Applying some jiggery-pokery, Judge Walker wrote that Labor was not interpreting the Fair Labor Standards Act when it… well, interpreted the Fair Labor Standards Act, because its interpretation parroted an earlier Supreme Court decision. Sure. Whatever.
Instead, the Second Circuit concocts a “primary beneficiary” test out of whole cloth — judging an internship based on whether the intern or the employer is the primary beneficiary of the relationship. The opinion even provides a “non-exhaustive set of considerations”:
1. 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.
2. 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.
3. The extent to which the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit.
4. The extent to which the internship accommodates the intern’s academic commitments by corresponding to the 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, the work of paid employees while providing significant educational benefits to the intern.
7. 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.
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If those look strikingly similar to the Department of Labor’s six factors, it’s because they are. But some people really want to see this decision as a world-changing redefinition of the law. From a Tweet I received yesterday:
AND CA2’s factor 1 explicitly says that if the intern knows he won’t be paid, it suggests he is not an employee.
Yes. And before this opinion the Department of Labor factor was, “The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.” Nothing changed. Moving the factor from last to first does not let companies off the hook in all cases if the employee agrees to work for free. No matter how much you may wish, this opinion is not Lochner II: Electric Boogaloo.
In the end, the Second Circuit remanded the case to Judge Pauley to perform a balancing test applying the same factors that he already balanced in the first decision. Unless the studio comes up with some really compelling new evidence why being an unpaid production assistant is way more educational than being a paid production assistant, the two interns who brought this case are going to win again.
That’s not to say this opinion was good news for interns. Far more damning than the stylistic morphing of the balancing test was the opinion’s use of its new “individualized” balancing test as a cudgel to screw interns out of class status:
In sum, even if Antalik established that Fox had a policy of replacing paid employees with unpaid interns, it would not necessarily mean that every Fox intern was likely to prevail on her claim that she was an FLSA employee under the primary beneficiary test, the most important issue in each case. Thus, assuming some questions may be answered with generalized proof, they are not more substantial than the questions requiring individualized proof.
Justice Alito told us that you can sexually harass unpaid interns, and the Second Circuit decided to give them a zesty rogering. It’s laughable to think that every unpaid intern at the same movie studio enjoyed an entirely unique educational experience. Indeed, this logic spits on the panel’s own discussion of Portland Terminal, a decision the Second Circuit defended for establishing uniform rules for everyone in the same internship program with the same employer. Apparently, learning to be a brakeman doesn’t possess the same diverse educational flair as getting coffee for a cinematographer.
But robbing interns of the availability of class status is a huge blow to protecting the rights of unpaid workers, even if the law itself is on their side. As Jordan Weissmann put it in Slate:
In the second part of its decision, the 2nd Circuit finds that Judge Pauley had incorrectly allowed a class action suit to press forward on behalf of everyone who interned at Fox Entertainment between 2005 and 2010. How come? All of those interns don’t have enough in common to join together in a single lawsuit. Instead, their claims need to be litigated more or less one by one—meaning that, more likely than not, they won’t be litigated at all. Lawyers have been happy to take these intern lawsuits on as potential class actions, because they can win a potentially large judgment or settlement by pooling lots of small claims together. But as the Hollywood Reporter’s Eriq Gardner notes, most former interns could never win enough money in a solo lawsuit to make the case worth an attorney’s time.
That sound you hear is the slamming of the courthouse door on exploited workers. Remember everybody, America is founded on the premise that the wronged can theoretically redress injustice, not that they have any practical hope of doing so.
Now can someone get me a nice, educational latte?
(The full opinion available on the next page…)
Companies That Exploit Unpaid Interns Just Won a Huge Victory at Court [Slate]
Earlier: Uh-Oh! Federal Judge Says We Might Have to Start Paying Interns
‘Tits Or GTFO’ Now A Legitimate Requirement For Unpaid Interns
If Unpaid Interns Don’t Like Their Bosses, They’ll Hate Justice Alito
