Can Interns Be Paid in Experience, or Only In Dollars?

We have all heard the expression: “You can’t get the job without the experience, and you can’t get the experience without the job.”  We have also heard the expression: “You are being paid in experience” when it comes to internships.  Well – at least that is what used to be said.  Today, however, the landscape has changed to a certain extent when it comes to pay for work performed by interns, in the for-profit business world.

Now, an employer must consider whether the intern is an actual “employee” or an “intern”, and for whose benefit the work is performed.  To assist with the analysis, we can look to a recent decision by the United States Court of Appeals for the Second Circuit, based in New York City.  In the case of Glatt v. Fox Searchlight Pictures, Inc., 811 F.3d 528 (2d Cir. 2015), the Court addressed the issue of compensation for interns.  The Glatt Court referred to a prior decision in which it “articulated a set of non-exhaustive factors to aid courts in determining whether a worker is an employee for purposes of the FLSA.”  The Court then stated: “In the context of unpaid internships, we think a non-exhaustive set of considerations should include:

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.

All of the circumstances of a relationship should be considered, and weighed.  No one factor from the above list is conclusive.  Employers in the first instance, and later potentially Courts are also free to look at other factors. Courts can look at economic realities, as well, to evaluate an entire internship program, if that provides more information and a clearer light than evaluating the circumstances of a specific intern.

Overall, one thing is clear – just because an individual is labeled as an “intern” does not mean that an employer is free from the concerns, and considerations, of whether that individual is entitled to be paid for their work.  Before making a final decision, an employer may wish to consult with an attorney, to have a better understanding of the wage and hour framework affecting intern compensation.