Compensation isn't everything: the threshold-remuneration test for employment discrimination under Title VII.

• Author: Morgan, Bryce

1. Introduction II. Background A. Title VII B. The Circuit Split on Remuneration 1. The Threshold-Remuneration Cohort 2. Remuneration as a Nondispositive Factor 3. The Fifth Circuit Decision III. Analysis A. Title VII's Language Regarding Employment B. Protecting the Livelihood of Employees C. The Employment of Unpaid Interns Under the Fair Labor Standard Act D. The Current State of the Test: Wang v. Phoenix Satellite Television US, Inc. IV. Recommendation A. This Test Preserves Title VII's Original Goal of Protecting Employees' Livelihood in the New Realities of Employment B. This Test Prevents Non-Employee Volunteers From Gaining Rights Under Title VII C. This Test Provides Concrete and Predictable Guidance to Employers VI. Conclusion.. I. INTRODUCTION

   The employment rights of unpaid interns have recently become a hot topic in both the public and private sectors. (1) With the growing importance of work experience for college students and new graduates, internships have become a vital component to the development of a successful career or even to landing an entry-level job. Although internships have become a standard portion of a young adult's resume, those interns who do not receive compensation for their efforts do not enjoy the basic protections of federal antidiscrimination laws in the majority of circuits. Most circuits have adopted a threshold-remuneration test, which allows a plaintiff to proceed with claims of employment discrimination only if she is receiving significant remuneration for her work. Title VII of the Civil Rights Act entitles only employees to protections from employment discrimination, and within the framework of the threshold-remuneration test, an employment relationship cannot exist without significant compensation flowing from one party to the other.

   This Note argues that unpaid interns and volunteer workers who are entitled to compensation under the Fair Labor Standards Act (FLSA) should also receive protections from employment discrimination under Title VII of the Civil Rights Act of 1964, regardless of whether the intern is actually receiving that compensation. Part II provides an overview of an employee's rights to be free from discrimination under federal law and control tests for employment. Additionally, Part II introduces the circuit split cases on the issue of a threshold-remuneration test. Part III analyzes the applicability of the threshold-remuneration test to the realities of today's employment landscape. Part III also provides an analysis of the FLSA's opposing view on what constitutes an employment relationship between an intern and an organization. Part IV recommends that courts expand the threshold-remuneration test to include a second prong, which would require courts to examine whether the FLSA entitles the unpaid worker to wages, and if so, consider that entitlement as actual remuneration.

2. BACKGROUND

   This Part explains the purpose of Title VII and some of its sections as they are relevant to this Note. These sections include the crucial statutory definitions of harassment, employers, and employees. Next, this Part discusses the threshold-remuneration test and the emergence of a circuit split on its utility in determining whether a plaintiff is an employee for purposes of Title VII. This Part provides background on the development of this circuit split and the factors that each of the two opposing sides has found to be most important. Finally, it discusses the Fifth Circuit's most recent decision regarding remuneration as a threshold to employment under Title VII.

   1. Title VII

      Title VII of the Civil Rights Act of 1964 prohibits employers from engaging in unlawful employment practices based on race, color, religion, sex, and national origin. (2) These unlawful employment practices include failing or refusing to hire or discharge an individual or discriminating in compensation or terms and conditions of employment based on a protected class. (3) The term "discriminate" includes both sexual harassment and retaliation under Title VII. (4)

      Although courts have easily applied the statute's principles in traditional employee-employer relationships, they have differed when applying the principles of the statute to non-traditional employment relationships, such as internships. (5) To determine whether Title VII's protections against discrimination extend to volunteer workers and unpaid interns, courts must determine whether the plaintiff is an "employee." (6) This requires courts to consult the statute's definitions section. (7)

      While any statute's definitions of terms are extremely important, Congress has left the Title VII definitions of employer and employee to judicial interpretation. (8) Under Title VII, the definition of an employer hinges on the definition of an employee. (9) The statute defines an employee, however, merely as an "individual employed by an employer." (10) These circular definitions offer little assistance to those unpaid workers, including volunteers and interns, who seek to bring suits for employment discrimination. Courts have been left to make this determination without explicit statutory guidance. (11) As a result, a circuit split has emerged over the issue of remuneration as a basic requirement for an employment relationship to exist. (12)

   2. The Circuit Split on Remuneration

      The threshold-remuneration test requires that an individual must receive significant remuneration to qualify as an employee who is entitled to freedom from employment discrimination under Title VII. (13) If a court determines that the plaintiff received significant remuneration, it will move forward to analyze the employment relationship under the economic realities or formal control tests. (14) However, if the court determines that the plaintiff did not receive significant remuneration, it will determine that an employment relationship cannot exist and will refrain from engaging in an unnecessary analysis of the factors within the other tests of employment. (15) The question of whether individuals must first demonstrate that they receive significant remuneration before a court will engage in an analysis of the employment relationship has been a divisive issue in the circuit courts. (16) The Second, Fourth, Fifth, Eighth, Tenth, and Eleventh Circuits have adopted this test. (17) On the other hand, the Sixth and Ninth Circuits have held that significant compensation is a relevant but nondispositive factor that must be considered along with all other indicators of an employment relationship as a whole. (18) The initial trend was for courts to require plaintiffs to demonstrate that they had received significant remuneration as a threshold test for employment. (19) In 2008 and 2011, however, two separate circuits reversed that trend by determining that remuneration itself was not dispositive. (20) But the most recent decision by the Fifth Circuit has again reversed the trend by siding with the earlier cases and once again requiring remuneration as a threshold inquiry. (21) This Part will discuss the elements that went into the reasoning of (1) the threshold-remuneration cohort, (2) the nondispositive factor cohort, and (3) the balancing of these factors by the Fifth Circuit in its recent decision.

      1. The Threshold-Remuneration Cohort

         In Graves v. Women's Professional Rodeo Association, Inc., the Eighth Circuit considered a case where a male alleged that he was the victim of discrimination on the basis of sex when the rodeo association denied him membership. (22) The court resorted to consulting a dictionary to determine what it means to employ an individual or to be an employee. (23) The court determined that the central focus of these definitions was the idea of compensation in an exchange for services where "an employer is someone who pays, directly or indirectly, wages or a salary or other compensation to the person who provides the services." (24) Because the members of the rodeo association received no compensation from the organization but rather were able to win prize money supplied by sponsors, the court determined that belonging to the association was not a "remunerative proposition." (25) Without the demonstration of remuneration, the court held that it was unnecessary to engage in analysis of the "economic realities" or "right to control" test. (26)

         In O 'Connor v. Davis, the Second Circuit considered a case of an unpaid intern who filed a claim of sexual harassment under Title VII. (27) The court held that a common-law agency analysis should only be undertaken where a hire has occurred. (28) The court reasoned that if a purported employee obtains no financial benefit, then no plausible employment relationship of any sort can exist. (29) The court considered a financial benefit from the employer to employee an "essential condition" of the employer-employee relationship. (30) Under this analysis, interns who do not receive a salary, health benefits, retirement benefits, or vacation are not able to bring a discrimination suit under Title VII.

         The Fourth Circuit dealt with the issue of a threshold remuneration test in Haavistola v. Community Fire Co. of Rising Sun, Inc. (31) In Haavistola, a female volunteer firefighter brought an action against the fire company, alleging sex discrimination. (32) The circuit court agreed with the district court's determination that Congress's intention in enacting Title VII was to "eliminate a pervasive, objectionable history of denying or limiting one's livelihood simply because of one's race, color, sex, religion or national origin." (33) Because unpaid volunteers' livelihoods are not denied or limited when they are the victims of discrimination, they are not "susceptible to the discriminatory practices which the act was designed to eliminate." (34) Based on this congressional intent, the court determined that a demonstration of remuneration for employment was an appropriate requirement. (35) The Fourth Circuit...