Intern or Employee?

Are interns considered FLSA employees of hospital according to the primary beneficiary test in Billy Schumann et al v Collier Anesthesia, P.A., et al

In Billy Schumann, et al v Collier Anesthesia, P.A. et al, the 11th Circuit agreed with the 2nd Circuit’s tweaking of the 70-year old “primary beneficiary test” of Portland Terminal in order to create a non-exhaustive set of seven (7) considerations and bring the test in line with contemporary economic realities. This resulted in the vacating and remanding of the case.

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The following are our comments and some excerpts from the 11th Circuit opinion:

“Upon receiving their master’s degrees, certifications, and licenses, Plaintiff-Appellant student registered nurse anesthetists are legally able to put people to sleep.  Plaintiffs in this case include twenty-five former student registered nurse anesthetists (“SRNAs” or “Students”) who attended a master’s degree program at Wolford College, LLC, with the goal of becoming certified registered nurse anesthetists (“CRNAs”). ”

“During the course of their study, the Students participated in a clinical curriculum, which, under Florida law, was a prerequisite to obtaining their master’s degrees.”

“Through this legal action, the Students sought to recover unpaid wages and overtime under the Fair Labor Standards Act, 29 U.S.C. § 201, et seq. (“FLSA”), for their clinical hours. After considering the six factors that the Department of Labor identified in guidance that, in turn, does no more than reduce the specific facts of Walling v. Portland Terminal Co., 330 U.S. 148, 67 S. Ct. 639 (1947), to a test, the district court determined that the SRNAs were not “employees” of Defendants and entered summary judgment for Defendants.”

     The 11th Circuit then laid the foundation for their disagreement with the District Court  summary judgment finding that no employment relationship existed between the students and Defendants and remanded the case back there as follows:

“But, with all due respect to the Department of Labor, it has no more expertise in construing a Supreme Court case than does the Judiciary. Portland Terminal is nearly seven decades old and, in our view, addresses a very different factual situation involving a seven-or-eight-day, railroad-yard-brakeman training program offered by a specific company for the purpose of creating a labor pool for its own future use. This case, however, concerns a universal clinical-placement requirement necessary to obtain a generally applicable advanced academic degree and professional certification and licensure in the field. ”

“So, while we follow Portland Terminal’s “primary beneficiary” test here, we do not believe that measuring the facts in this case by a strict comparison to those in Portland Terminal allows us to identify the primary beneficiary of a modern-day internship for academic credit and professional certification. As a result, we now adopt an application of Portland Terminal’s “primary beneficiary” test specifically tailored to account for the unique qualities of the type of internship at issue in this case. To allow the district court to apply this test in the first instance and, if the district court desires, to give the parties an opportunity to further develop the  record to address the components of the test, we remand this case for further proceedings consistent with this opinion.”

“After considering the facts presented by each party, the district court granted summary judgment in favor of Defendants, finding that the Students were not employees under the FLSA, so they were not entitled to a minimum wage or overtime pay.”

“On appeal, the Students contend that, in rendering its decision, the district court improperly declined to follow the six-factor test promulgated by the Department of Labor’s Wage and Hour Division. The Students also assert that genuine issues of material fact exist in the case, which preclude the entry of summary judgment in favor of Defendants.”

The FLSA and employee status.

     “Congress enacted the FLSA “to aid the unprotected, unorganized and lowest paid of the nation’s working population; that is, those employees who lacked sufficient bargaining power to secure for themselves a minimum subsistence wage.” Brooklyn Sav. Bank v. O’Neill, 324 U.S. 697, 707 n.18, 65 S. Ct. 895, 902 n. 18 (1945). In addition, Congress sought “to lessen, so far as seemed then practicable, the distribution in commerce of goods produced under subnormal labor conditions.” Rutherford Food Corp. v. McComb, 331 U.S. 722, 727, 67 S. Ct. 1473, 1475 (1947).”

“The protections the FLSA affords, however, extend to “employees” only. As a result, only individuals falling within the Act’s definition of “employee” are entitled to minimum wages and overtime.  The tricky part arises in determining who falls within the FLSA’s definition. As other courts have observed, the FLSA’s definitions as they relate to who qualifies as an “employee” are not precise. The statute defines an “employee” as  “any individual employed by an employer,” and an “employer,” in turn, includes “any person acting directly or indirectly in the interest of an employer in relation to an employee.” 29 U.S.C. §§ 203(d) and (e)(1). The Act also provides that the term “employ” means “to suffer or permit to work.” Id. at § 203(g). Congress intended for these broad definitions to be “‘comprehensive enough’ to include ‘working relationships, which prior to this Act, were not deemed to fall within an employer-employee category.’” Scantland, 721 F.3d at 1311 (citing Rutherford Food, 331 U.S. at 729, 67 S. Ct. at 1476 (quoting Portland Terminal, 330 U.S. at 150-51, 67 S. Ct. at 640)).”

“Nevertheless, the terms “employee” and “employer” “cannot be interpreted so as to make a person whose work serves only his own interest an employee of another person who gives him aid and instruction.” Portland Terminal, 330 U.S. at 152, 67 S. Ct. at 641. As the Supreme Court has cautioned, the FLSA was “not intended to stamp all persons as employees who, without any express or implied compensation agreement, might work for their own advantage on the promises of another. Otherwise, all students would be employees of the school or college they attended, and as such entitled to receive minimum wages.” Id. ”

“… most recently, in Glatt, 791 F.3d at 384, the Second Circuit has reflected on the limitations of comparing the characteristics of the modern internship to the specific facts at issue in Portland Terminal. As the Second Circuit observed, Portland Terminal is now 68 years old. Id. The facts of that case do not necessarily “reflect[] the role of internships in today’s economy . . . .” See id. (referring to the DOL’s Handbook guidance).”

After discussing the legal background for reaching their decision, the 11th Circuit focused on the following:

“We add to these points the significant fact that the training involved in Portland Terminal was not a universal requirement for a particular type of educational degree or for professional certification or professional licensure    in the field. Instead, the Portland Terminal training was offered by a company for its own, specific purposes, to create a ready labor pool for itself. So trying to evaluate the program at issue here by comparing it to all        of the facts from Portland Terminal that were relevant and helpful to assessing the training program at issue in that case, is like trying to use a fork to eat soup. Like the fork and the spoon, the training at issue in    Portland Terminal and in the case under review have similarities and may be in the same general category (eating utensils and training programs). But comparison to the facts from Portland Terminal alone can cover the gamut of relevant considerations in a case like the one before us no better than a fork can do a spoon’s job in ladling soup.”

“Longer-term, intensive modern internships that are required to obtain academic degrees and professional certification and licensure in a field are just too different from the short training class offered by the railroad in Portland Terminal for the purpose of creating its own labor pool. As exemplified by the facts of the pending case, modern internships can play an important—indeed critical—role in preparing students for their chosen careers. Imagine if a CRNA could report to work on her first day and be allowed unsupervised to conduct the induction, maintenance, and emergence phases of anesthesia administration, having only ever read about or watched someone else perform them. The potential danger and discomfort to the patient under such circumstances is self-evident and startling. So we need anesthesiologists and CRNAs who are willing to teach SRNAs their trade through internships.”

“Yet taking on the responsibility of supervising and teaching SRNAs is a heavy one with serious potential costs. We cannot realistically expect anesthesiology practices to expose themselves to these costs by providing students with the opportunity to participate in 550 cases each, without receiving some type of benefit from the arrangement. See Am. Airlines, 686 F.2d at 272 (“if attendance were solely for the trainee’s benefit, the company would not conduct the [training] except as a matter of altruism or public pro bono”).”

“But the mere fact that an anesthesiology practice obtains benefits from offering SRNAs internships cannot, standing alone, render the student interns “employees” for purposes of the FLSA. See, e.g., Solis, 642 F.3d at 530-31 (though the school derived benefits from students’ work at its facilities, the value of the benefits to the students from the work arrangement outweighed the benefits to the school, so the students were not “employees”). Indeed, there is nothing inherently wrong with an employer’s benefiting from an internship that also plainly benefits the interns.”

“Nevertheless, we recognize the potential for some employers to maximize their benefits at the unfair expense and abuse of student interns. And that is a problem.”

“So our dilemma arises in determining how to discern the primary beneficiary in a relationship where both the intern and the employer may obtain significant benefits. We think that the best way to do this is to focus on the benefits to the student while still considering whether the manner in which the employer implements the internship program takes unfair advantage of or is otherwise abusive towards the student. This orientation allows for student internships to accomplish their important goals but still accounts for congressional concerns in enacting the FLSA.”

“We also believe that the Second Circuit’s articulation of “a non-exhaustive set of considerations” for evaluation in determining the “primary beneficiary” in cases involving modern internships goes far towards fulfilling this function. In particular, the Second Circuit has identified the following factors:

  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.

Glatt, 791 F.3d at 384. Under the Second Circuit’s approach, “[n]o one factor is dispositive and every factor need not point in the same direction for the court to conclude that the intern is not an employee . . . .” Id. Rather, courts must engage in a “weighing and balancing [of] all of the circumstances,” including, where appropriate, other considerations not expressed in the seven factors. Id. The Second Circuit has described this approach as “flexible” and “faithful to Portland Terminal,” reasoning that “[n]othing in the Supreme Court’s decision suggests that any particular fact was essential to its conclusion or that the facts on which it relied would have the same relevance in every workplace.” Id. at 384-85. ”

“But, as we have explained, the modern internship as a requirement for academic credit and professional certification and licensure is very different. For starters, the students seeking the internships—as opposed to a particular company’s business requirements—drive the need for the internships to exist. Second, licensure and certification laws provide evidence that we as a society have decided that clinical internships are necessary and important. Third, we find it difficult to conceive that anesthesiology practices would be willing to take on the risks, costs, and detriments of teaching students in a clinical environment for extended periods (four semesters, for example) without receiving some benefit for their troubles. As we have further noted, though, the mere fact that an employer obtains a benefit from providing a clinical internship does not mean that the employer is the “primary beneficiary” of the relationship. Therefore, we cannot see how consideration of whether the employer gains an “immediate advantage” from an internship, in and of itself, brings us any closer to resolving who the primary beneficiary of the relationship is.”

“Instead, we focus on the Glatt factors. In order to allow the district court to apply these factors in the first instance and, if it desires, to permit the parties to supplement the record, we remand this case to the district court.”

“Finally, we do not take a position at this time regarding whether the Students in this case were “employees” for purposes of the FLSA.”  

“With these factors in mind, we vacate the district court’s entry of summary judgment for Defendants and remand for further proceedings consistent with this opinion.”