Whaling on Walling: A Uniform Approach to Determining Whether Interns Are 'Employees' Under the Fair Labor Standards Act

• Author: Cody Elyse Brookhouser
• Position: J.D. Candidate, The University of Iowa College of Law, 2015; B.S., The University of Arkansas, 2012
• Pages: 751-773

Whaling on Walling : A Uniform Approach to Determining Whether Interns Are “Employees” Under the Fair Labor Standards Act Cody Elyse Brookhouser  ABSTRACT: This Note argues that, of the tests currently used by circuit courts to determine who constitutes an “employee” under the Fair Labor Standards Act, the Supreme Court should clarify that the totality of the circumstances test is most consistent with its decision in Walling v. Portland Terminal Co. This issue calls for clarity in light of the influx of litigation surrounding unpaid internships—most prominently, the recent decision in Glatt v. Fox Searchlight Pictures Inc. With this growth in litigation, employers and interns alike deserve a uniform approach in determining “employee” status under the Fair Labor Standards Act. I. INTRODUCTION ............................................................................. 752 II. THE FAIR LABOR STANDARDS ACT: WHO CONSTITUTES AN “EMPLOYEE”? ................................................................................ 753 A. WALLING ’ S T RAINEE E XCEPTION ............................................. 754 B. I NTERPRETATIONS IN THE W AKE OF WALLING ......................... 756 1. Primary Beneficiary Test ............................................... 756 2. Totality of the Circumstances Test ............................... 758 III. THE IMPENDING QUESTION: ARE INTERNS “EMPLOYEES”? .......... 762 A. T HE GLATT D ECISION ............................................................. 762 B. C ONSEQUENCES OF GLATT ....................................................... 766  J.D. Candidate, The University of Iowa College of Law, 2015; B.S., The University of Arkansas, 2012. Thank you to my mom for her impartation of [extreme] independence combined with endless opportunities and support. 752 IOWA LAW REVIEW [Vol. 100:751 IV. THE TOTALITY OF THE CIRCUMSTANCES TEST AS THE UNIFORM APPROACH FOR DETERMINING WHETHER INTERNS ARE “EMPLOYEES” ................................................................................ 768 A. T OTALITY OF THE C IRCUMSTANCES ’ C ONSISTENCY WITH WALLING ............................................................................... 768 B. B ENEFITS OF A U NIFORM T OTALITY OF THE C IRCUMSTANCES T EST ....................................................................................... 771 V. CONCLUSION ................................................................................ 773 I. INTRODUCTION Under the Fair Labor Standards Act (“FLSA”), employees are guaranteed a minimum wage for their work. 1 However, the FLSA provides virtually no guidance for determining who constitutes an employee entitled to minimum wage compensation. 2 The United States Supreme Court shed light on the FLSA’s definition of “employee” only once, in Walling v. Portland Terminal Co. , in 1947. 3 Since then, various circuit courts have interpreted the Walling opinion and the trainee exception that it created to the FLSA. 4 These attempts have produced varying and inconsistent tests by which the courts determine whether a worker is an “employee” or a trainee. 5 Recently, the focus of these cases has shifted to the ever-popular unpaid internship. 6 Internships provide invaluable experience for students entering the workforce. 7 Further, it has become increasingly difficult for students to gain post-graduation employment in today’s job market without internship experience in a given industry. 8 However, with circuit courts using varying tests to determine employee status, 9 it has proven difficult for employers to 1. 29 U.S.C. § 206(a)(1)–(2) (2013). 2 . See infra notes 22–23 and accompanying text. 3. Walling v. Portland Terminal Co., 330 U.S. 148, 152 (1947). 4. See, e.g. , Kaplan v. Code Blue Billing & Coding, Inc., 504 Fed. App’x 831, 834 (11th Cir. 2013), cert. denied , 134 S. Ct. 618 (2013); Solis v. Laurelbrook Sanitarium & Sch., Inc., 642 F.3d 518, 522–23 (6th Cir. 2011); Reich v. Parker Fire Prot. Dist., 992 F.2d 1023, 1025–26 (10th Cir. 1993); McLaughlin v. Ensley, 877 F.2d 1207, 1208–11 (4th Cir. 1989); Donovan v. Am. Airlines, Inc., 686 F.2d 267, 271 (5th Cir. 1982). 5. See infra Part II.B. 6. See Ross Perlin, Unpaid Interns: Silent No More , N.Y. TIMES (July 20, 2013), http://www. nytimes.com/2013/07/21/jobs/unpaid-interns-silent-no-more.html (stating that over 15 unpaid internship lawsuits have been filed since summer of 2013). 7. See Alison Green, Why Unpaid Internships Should Be Legal , U.S. NEWS (July 1, 2013, 8:55 AM), http://money.usnews.com/money/blogs/outside-voices-careers/2013/07/01/why-unpaid-intern ships-should-be-legal. 8. See id. 9. See infra Part II.B. 2015] WHALING ON WALLING 753 know whether their interns are covered by the FLSA, and consequently, whether they must receive pay in conformance with the FLSA’s minimum wage requirement. 10 As unpaid internship litigation grows, 11 employers may become reluctant to offer internship opportunities for fear of lawsuits and liability for minimum wage back pay. 12 As a result, students seeking these opportunities, and subsequent employment, may be hard-pressed to find these much needed internships. 13 This Note argues that it is critical for both employers and interns to have a clarifying, uniform test by which to determine the employee versus trainee distinction created in Walling . Part II examines Walling ’s trainee exception and the factors the Court used in creating it. Part II further analyzes various circuit courts’ interpretations of these factors and their attempts to distinguish between employees and trainees. Part III then analyzes the recent and most prominent unpaid internship case, Glatt v. Fox Searchlight Pictures Inc. , 14 and proceeds to discuss the problems flowing from the inconsistent standards used to determine who constitutes an employee under the FLSA. Part IV finally argues for a uniform, totality of the circumstances approach, as this approach is most consistent with the Supreme Court’s Walling decision and will have the most beneficial effects on both employers and interns. II. THE FAIR LABOR STANDARDS ACT: WHO CONSTITUTES AN “EMPLOYEE”? The FLSA requires all employers to pay their employees a minimum wage. 15 This minimum wage requirement applies to every employment relationship where the worker falls under the FLSA’s definition of “employee.” 16 Once it is established that an employment relationship exists between an employer and employee, 17 the FLSA’s requirements apply to that relationship and are enforced by the Department of Labor (“DOL”). 18 The DOL enforces the FLSA by conducting workplace investigations to ensure that employers are complying with its requirements. 19 Through an investigation, if an employer is found to be in violation of the FLSA, the DOL “may recommend changes in employment practices to bring an employer into 10. See infra Part III.B. 11. See infra Part III.B. 12. See infra Part III.B. 13. See infra Part III.B. 14. Glatt v. Fox Searchlight Pictures, Inc., 293 F.R.D. 516 (S.D.N.Y. 2013). 15. 29 U.S.C. § 206(a)(1)–(2) (2013). 16. Id. § 203(e)(1)–(5). 17. The issue of construing the FLSA in order to determine whether a person is an “employee” is taken up in great detail later in this Part. 18. See Enforcement Under the Fair Labor Standards Act , U.S. DEP’T OF LABOR, http://www.dol. gov/elaws/esa/flsa/screen74.asp (last visited Nov. 12, 2014). The DOL has a specific Wage and Hour Division that “enforces the FLSA for employees.” Id. 19. Id. 754 IOWA LAW REVIEW [Vol. 100:751 compliance.” 20 Beyond having to implement these changes, a violating employer may be required to pay back wages to employees as compensation for the work they performed during the relevant period. 21 Since an employer is subject to the DOL’s enforcement of the FLSA, and since the obligation to pay minimum wage hinges on whether a worker falls under the FLSA’s definition of “employee,” it is essential that an employer knows whether it is truly “employing” an “employee” under the FLSA. However, as this Note addresses, the statutory definition of “employee” is of little help in determining whether or not one is, in fact, an employee under the FLSA. The FLSA simply provides: an “employee means any individual employed by an employer.” 22 As the seminal case Walling v. Portland Terminal Co. illustrates, this circular definition is of little interpretive assistance. 23 A. WALLING ’ S T RAINEE E XCEPTION In Walling , the plaintiff brought suit against the railroad company for which he worked in a training program for no pay. 24 The defendant company asserted that, as a participant in its training program, the plaintiff was not an employee covered by the FLSA, and therefore, was not entitled to minimum wage. 25 The plaintiff’s work consisted of training in order to learn the trade of working on the railroad, with the hope of subsequent employment in the industry after the training period. 26 The railroad consistently ran its training program without pay, and the workers never expected compensation under the FLSA or otherwise. 27 Despite the mutual understanding that there would be no pay for work performed during the training period, the plaintiff filed suit claiming back wages as an employee. 28 In determining whether or not 20. Id. 21. Id. This investigative process is addressed administratively through the DOL’s Wage and Hour Division; however, if a violating employer continues to fail to comply with the FLSA, a lawsuit may be brought by the employee, or the Secretary of Labor on behalf of the employee, in order to recover the back wages. See id. 22. 29 U.S.C. § 203(e)(1) (2013) (internal quotation marks omitted). Furthermore, the FLSA defines “employ” to mean “to suffer or permit to work.” Id. § 203(g). It is these ambiguous and circular definitions that give rise to difficulties in determining whether or not one is an “employee” being “employed” by an “employer.” 23. See Walling v. Portland Terminal Co., 330 U.S. 148, 152–53 (1947)...