As discussed in this space just last week, there is an ongoing war regarding compensation of interns under the FLSA. In a victory for employers, last week, the United States Court of Appeals for the Eleventh Circuit ruled that individuals completing externships relating to their enrollment in MedVance Institute’s Medical Billing and Coding Specialist program were not employees of the entities for which the externships were performed and accordingly were not entitled to minimum wage and overtime under federal law. Kaplan v. Code Blue Billing & Coding, Inc., 2013 U.S. App. LEXIS 1433 (11th Cir. 2013).

In Kaplan, plaintiffs alleged that while serving at externs at their respective putative employers, “they were performing tasks for Defendants’ businesses [and] Defendants benefitted economically from their work.” Thus, they argued, they did not meet all six factors of the DOL’s conjunctive six factor test for nonpaid “trainees.” The court rejected this argument, observing that, in addition to the fact that the externs received academic credit (belying employee status), the externs were trained by each employer’s respective staffs, which “caused Defendants’ businesses to run less efficiently and caused at least some duplication of effort.” Based on these facts, the Court concluded that Defendants “received little if any economic benefit from Plaintiffs’ work” and under the economic realities of the arrangement were not plaintiffs’ employer. 

As to one plaintiff, the Court separately ruled that, because the putative employer where she served as an extern understood the arrangement as delineated between the parties and MedVance (i.e., an unpaid externship program), and assumed that the individual would not be an employee covered by the FLSA, no alleged violation based on the course of conduct at issue could be “willful.” This plaintiff’s claims were thus time barred under the two year limitations period applicable to non-willful violations of FLSA. 

Observed Florida-based Jackson Lewis partner Benjamin Sharkey, “Clearly, the Court in Kaplan was attuned to the practical, ‘real world’ context of the allegations made by these externs, and the unworkable nature of any contrary rule, where potential externs would be seeking vital on-the-job instruction, and requiring payment in addition.  Further, such a finding would discourage employers from participating in such externship programs and detrimentally effect the educational growth of the students.”

Courts around the country continue to field claims brought by interns, externs, trainees, volunteers or other unpaid service providers. Kaplan is an encouraging result, but employers and academic institutions should continue to be mindful of this issue in shaping and/or participating in internship/externship programs.