Xuedan Wang v. Hearst Corp.
877 F.3d 69 (2017)
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Rule of Law:
To determine if an unpaid intern is an 'employee' under the Fair Labor Standards Act (FLSA), courts apply the 'primary beneficiary' test, which balances the totality of the circumstances using a non-exhaustive, seven-factor framework to decide whether the intern or the employer is the primary beneficiary of the relationship.
Facts:
- Hearst Corporation maintained dozens of unpaid internship programs with its various print magazines.
- The five appellants, including Xuedan Wang, worked as unpaid interns in one of these programs.
- The internships required candidates to receive prior approval for college credit, carried no expectation of compensation, and offered no guarantee of eventual full-time employment.
- All appellants had an academic or aspiring professional connection to the industries of their internships, such as fashion or writing.
- While all appellants received prior approval for academic credit, not all ultimately received credit from their degree-granting institutions for various reasons.
- The interns performed a range of tasks, including some they described as menial and repetitive, but also testified that they gained valuable knowledge and skills relevant to their professional pursuits.
- The interns shared common complaints that they received little formal training or close supervision and that they mastered their tasks quickly but continued to perform them for the duration of the internship.
Procedural Posture:
- Xuedan Wang filed a putative class and collective action lawsuit against Hearst Corporation in the U.S. District Court for the Southern District of New York, alleging violations of the FLSA and New York Labor Law.
- Seven other interns opted into the suit after the district court granted collective certification.
- The district court initially denied the plaintiffs' motion for partial summary judgment.
- The U.S. Court of Appeals for the Second Circuit vacated that denial and remanded the case for reconsideration in light of its decision in Glatt v. Fox Searchlight Pictures, Inc.
- On remand, Hearst (defendant) moved for summary judgment against the remaining plaintiffs.
- The district court granted Hearst's motion for summary judgment, finding that the plaintiffs were interns, not employees, as a matter of law.
- Five of the plaintiffs (appellants) appealed the district court's summary judgment ruling to the U.S. Court of Appeals for the Second Circuit, with Hearst as the appellee.
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Issue:
Does an unpaid intern qualify as an 'employee' entitled to wages under the Fair Labor Standards Act (FLSA) when, under the totality of the circumstances evaluated by the 'primary beneficiary' test, the intern is the primary beneficiary of the relationship, even if the intern performs some menial tasks and the employer receives some benefit from their work?
Opinions:
Majority - Jacobs, J.
No. An unpaid intern does not qualify as an employee under the FLSA when the totality of the circumstances indicates the intern is the primary beneficiary of the relationship. The court applied the seven-factor 'primary beneficiary' test from Glatt v. Fox Searchlight Pictures, Inc. to determine the 'economic reality' of the relationship. Factors one and seven (no expectation of compensation or a job) clearly favored Hearst, as the interns applied with this understanding. The court found that factors two and five (training and duration) also favored Hearst, reasoning that 'training' under Glatt includes practical, hands-on vocational experience, not just classroom-style instruction, and that repeating tasks can be a form of professional practice. Factors three and four (academic connection and calendar) generally favored Hearst because the internships were tied to the academic calendar and required pre-approval for academic credit, which the court found more telling than whether credit was ultimately awarded in each individual case. While factor six (displacement of paid employees) favored the interns because they performed some work that paid employees might otherwise do, this single factor is not dispositive. Balancing the totality of the circumstances, the undisputed facts demonstrated that the interns were the primary beneficiaries of the relationship and therefore were not employees under the FLSA.
Analysis:
This decision reinforces the flexible, totality-of-the-circumstances 'primary beneficiary' test as the standard for intern-employee classification under the FLSA. It clarifies that 'training' is broadly defined to include practical and vocational experience, not just formal, academic-style instruction, thus giving employers more latitude in designing unpaid internships. The ruling solidifies the principle that an employer may derive a tangible benefit from an intern's work without creating an employment relationship, so long as the intern remains the primary beneficiary. Finally, the case confirms that courts can resolve these fact-intensive inquiries on summary judgment by weighing the undisputed facts, preventing many such cases from proceeding to a full trial.
