Ninth Circuit Adopts “Primary Beneficiary” Test for Intern Status Under FLSA

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The U.S. Court of Appeals for the Ninth Circuit has joined the Second and Eleventh Circuits in rejecting the Department of Labor’s restrictive test for intern v. employee status under the Fair Labor Standards Act, instead adopting a “primary beneficiary” test. Under this test, the economic realities of the relationship are examined in order to determine who derives the primary benefit.

In Benjamin v. B & H Education, Inc., the Ninth Circuit applied the seven non-exhaustive factors identified by the Second Circuit in Glatt v. Fox Searchlight Pictures, Inc. to assess whether cosmetology and hair design students or the beauty schools were the primary beneficiary of the relationship:

  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.

The court found that the students were not employees, even though they spent significant time performing menial and unsupervised tasks, because they were the primary beneficiaries of the educational program, at the end of which they were qualified to practice cosmetology.

Lessons Learned:  The federal appellate courts have been consistent in finding that the DOL’s intern test, which was articulated in a 2010 guidance under the Obama administration, does not acknowledge the realities of the business world. The current administration clearly takes a different approach, as evidenced by the actions of the DOL and the National Labor Relations Board over the past year, in rolling back some of the Obama-era pro-employee decisions and regulations. Accordingly, we would expect that the Trump DOL would not seek to apply the agency’s test, and that other federal appellate courts will also adopt the Glatt economic realities test.