Is Anyone Still Using Unpaid Interns?

I’ve cautioned about the use of unpaid interns almost as long as this blog as been a blog (here, here, and here, for example). Last week, the 11th Circuit, in Schumann v. Collier Anesthesia [pdf], became the third federal appellate court to cast aside the DOL’s six-factor internship analysis for a stricter “primary beneficiary” test (joining the 6th Circuit and 2nd Circuit).

In Schumann, the court questioned the employer’s use of unpaid student registered nurse anesthetists participating in a clinic program as part of their master’s degree curriculum. The court agreed with the 2nd Circuit that the DOL’s six-factor internship analysis is antiquated, instead balancing, via the following factors, who received the primary benefit of the relationship—the employer (in which case the intern is an employee who must be paid) or the employee (in which case the internship can be unpaid):

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.

Notably, the Schumann court noted that the internship analysis is not necessarily all-or-nothing, and that one can be a bona fide intern for part of the engagement, but an employee for others:

That is, we can envision a scenario where a portion of the student’s efforts constitute a bona fide internship that primarily benefits the student, but the employer also takes unfair advantage of the student’s need to complete the internship by making continuation of the internship implicitly or explicitly contingent on the student’s performance of tasks or his working of hours well beyond the bounds of what could fairly be expected to be a part of the internship. For example, in the context of an internship required for an academic degree and professional licensure and certification in a medical field, consider an employer who requires an intern to paint the employer’s house in order for the student to complete an internship of which the student was otherwise the primary beneficiary. Under those circumstances, the student would not constitute an “employee” for work performed within the legitimate confines of the internship but could qualify as an “employee” for all hours expended in painting the house, a task so far beyond the pale of the contemplated internship that it clearly did not serve to further the goals of the internship.

Ultimately, the court took no position on whether these student nurses were (or were not) employees, instead sending the case back to the district court to make the necessary factual determinations under the primary beneficiary test. Assuming this case is not settled, this case will be very interesting to watch on remand, as the relationship inSchumann is much closer to the traditional unpaid internship—training in exchange for school credit as part of an educational curriculum. A judgment for the interns in this case would be pretty darn close to the final coffin nail for unpaid internships.

While we watch this case, employers should continue to assume that non-student interns are paid employees, and should consult with counsel on whether student interns should be paid.