Student Interns May Be Employees Under FLSA

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By Jon Steingart

Sept. 14 — A group of 25 former students in a nursing master's degree curriculum whose training included participation in a clinical program can proceed with their collective action claims that they are entitled to wages and overtime under the Fair Labor Standards Act, a federal appeals court ruled Sept. 11.

The U.S. Court of Appeals for the Eleventh Circuit reversed summary judgment for an anesthesia college in Florida and a group of doctors affiliated with the school after finding a lower court shouldn't have relied on the Labor Department's guidance in its Field Operations Handbook. The handbook restates the U.S. Supreme Court's ruling in Walling v. Portland Terminal Co., 330 U.S. 148, 6 WH Cases 611 (1947), which provided six criteria that, if met, mean “trainees or students are not employees within the meaning of the FLSA,” the appeals court said.

“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” type at issue in Portland Terminal, the appeals court said. Instead, it adopted the seven-factor approach articulated by the Second Circuit in Glatt v. Fox Searchlight Pictures, Inc., 791 F.3d 376 (2d Cir. 2015), which the Second Circuit described as “flexible” and “faithful to Portland Terminal”.

Judge Robin S. Rosenbaum wrote the court's opinion, joined by Judges Beverly B. Martin and R. David Proctor.

Long-Standing Test Extended.

The court distinguished Portland Terminal from the students' situation. In Portland Terminal, a railroad offered a brake operator training program “for the purpose of creating a labor pool for its own future use,” the court said. Participants in the week-long training weren't guaranteed jobs upon completion, but completion was a prerequisite to being hired into a brake operator position with the railroad.

The Supreme Court concluded the Portland Terminal trainees weren't employees under the FLSA because they wouldn't be considered employees if they had participated in a training program unaffiliated with the railroad. The FLSA wasn't intended to penalize an employer for providing free training that “would most greatly benefit” the trainees, the high court said.

From these words, the Eleventh Circuit said, “courts reviewing cases involving students and trainees … have, for the most part, concentrated on evaluating the ‘primary beneficiary' of the training or school program to determine whether participants constituted ‘employees' under the FLSA” because this approach “reveals the ‘economic reality' of the situation.”

The college's attorney, Tammie L. Rattray of Ford & Harrison LLP, told Bloomberg BNA Sept. 14 she is pleased the court recognized that the old “primary beneficiary” test is outdated and “not applicable in modern society.”

The anesthesia practice's attorney, Jeffrey D. Fridkin of Grant Fridkin Pearson P.A., said: “We are extremely confident that under these new seven factors the district court will again find that these students are not employees but are students.”

The nursing students' attorney declined to speak on the record about the case.

Who Is ‘Primary Beneficiary?'

The court said its ruling follows Portland Terminal's “primary beneficiary” test, but that case isn't directly instructive. Taking on the responsibility of training nurse anesthetists carries “serious potential costs,” the court said.

An anesthesiology practice couldn't be expected to expose itself to these costs “without receiving some type of benefit from the arrangement,” the court said. “But the mere fact that an anesthesiology practice obtains benefits from” the arrangement wasn't enough to make the students employees, it said.

The students' case presents a situation “where both the intern and the employer may obtain significant benefits,” the court said. Consequently, it decided “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.”

In order to balance these concerns, the court said the Second Circuit's Glatt factors “effectively tweak the Supreme Court’s considerations in evaluating the training program in Portland Terminal to make them applicable to modern-day internships like the type at issue here.”

The court remanded the case to the district court so it can analyze the students' claims according to the Glatt factors. The students “are legally able to put people to sleep” once they graduate and receive their licenses, the court said. “We have heard, though never ourselves experienced, that some legal opinions can do the same thing. We are hopeful that this one will not,” it added.

Kwall, Showers & Barack PA and Weldon & Rothman PL represented the nursing students.

To contact the reporter on this story: Jon Steingart in Washington at jsteingart@bna.com

To contact the editor responsible for this story: Susan J. McGolrick at smcgolrick@bna.com

Text of the case is available at http://www.bloomberglaw.com/public/document/BILLY_SCHUMANN_DUSTIN_ABRAHAM_on_behalf_of_themselves_and_others_.