Inside: The hot new wage & hour issue: Unpaid internships

Many judicial approaches are based off the Supreme Court's decision in Walling v. Portland Terminal Co.


For centuries, the young worker learned the skills of his or her trade by apprenticing with a master craftsman, often as little more than an unpaid, indentured servant. Of course, both indentured servitude in general and unpaid employment in particular are now relics of another time, but the concept of employing students is a familiar one. What had been less familiar, but has become increasingly so, is the continued willingness of employers to provide a students with a practical working experience but not to pay for the work. That is, the widespread growth of the so-called “unpaid internship.” This, in turn, has led to a marked increase in litigation claiming that such interns are statutory employees entitled to minimum wage and overtime compensation. This article will address that trend.

The DOL’s position is effectively an “all-or-nothing” proposition under which the individual will be deemed to be an employee unless the employer meets the burden of establishing all six factors. Many courts, meanwhile, adopt a more flexible approach. The 4th Circuit and 6th Circuit, for example, utilize the “primary benefit” test approach, under which the individual is entitled to FLSA protection if an employer receives “the primary benefit from [the] working relationship,” but not where the individual “receives the primary benefit of the work performed for a purported employer,” and the intern’s presence “does more harm to the purported employer’s operations than good (or no good at all).” Other courts, including two recent, high-profile District Court decisions, apply a “totality of the circumstances” test under which the Walling factors are relevant but not determinative and where the fundamental inquiry is into the “economic reality” of the relationship.

For example, in Demayo v. Palms West Hospital Ltd. Partnership (S.D. Fla. 2013), the plaintiff was enrolled in a surgical technician vocational program, which required completion of an unpaid hospital “externship.” During the externship, the plaintiff participated in 185 surgical procedures and also performed various cleaning and administrative tasks, such as stocking and organizing supplies, organizing files, preparing and cleaning operating rooms, and taking out the garbage. After graduating, she sued both the school and the hospital for unpaid minimum wages and overtime compensation. Applying the “totality of the circumstances” approach, the court found no employment relationship, principally because (a) the program was for the benefit of the plaintiff because she received “a general gain of responsibility, knowledge, and experience” on surgical procedures, (b) the extern did not displace regular employees or otherwise save on staffing or payroll and (c) the “employer” incurred the additional burden of monitoring, supervising, and providing feedback regarding the plaintiff’s work.

Contributing Author

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James A. Matthews, III

James A. Matthews, III is co-chair of Fox Rothschild’s labor & employment law department. He has more than 25 years experience representing management in all...

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