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Externs Are Not Found Employees Under the FLSA


By Howard Kastrinsky with a contribution from Doug Hanson

The U.S. Court of Appeals for the Eleventh Circuit has held that students completing externships relating to their enrollment in a specialty program were not employees of the entities for which the externships were performed under the Fair Labor Standards Act (FLSA).  The students neither expected to receive compensation nor were they compensated for their work while serving as externs.

Three students were enrolled in an institute’s medical billing and coding specialist program.  The institute required all students to complete an externship after finishing their other course work.  The three students completed externships at three different companies.  They neither expected nor received payment for the work they performed during their externships.

The students later filed suit alleging they were entitled to receive minimum wage under the FLSA for work they performed while serving as externs.  They argued that, given the lack of formal structure and the repetitive nature of the work they were assigned, they provided an economic benefit to the employers for which they received very little educational benefit.

The trial court agreed with the employers’ argument that the students were not “employees” within the meaning of the FLSA.  The students then appealed that decision to the Eleventh Circuit.

In determining whether an employer-employee relationship existed between the externs and the companies for whom they worked, the Eleventh Circuit utilized an “economic realities” test.  Under that test, an individual is not an employee under the FLSA when: (1) the work is for their own advantage or personal purpose; and (2) the work provides no immediate advantage for the alleged employer.

The externs argued their externship experiences were of little educational benefit.  However, they did engage in hands-on work for their formal degree programs.  They received academic credit for their work, and by completing an externship, were eligible to earn their degrees.

The Eleventh Circuit found that the alleged employers received little if any economic benefit from the externs’ work.  The undisputed evidence showed that the employers’ staffs spent time — time away from their regular duties — training the externs and supervising and reviewing their work.  Thus, the externs caused the businesses to operate less efficiently and caused at least some duplication of work.   Accordingly, the appellate court held that the externs were not employees within the ambit of the FLSA under the economics realties test.

Furthermore, the Eleventh Circuit found that its conclusion was supported by the U.S. Department of Labor’s test for determining if a “trainee” is an employee.  Under that test, a trainee is not an employee if: (1) the training, even though it includes actual operation of the facilities of the employer, is similar to that which would be given in a vocational school; (2) the training is for the benefit of the trainees; (3) the trainees do not displace regular employees, but work under close supervision; (4) the employer that provides the training derives no immediate advantage from the activities of the trainees and on occasion his operations may actually be impeded; (5) the trainees are not necessarily entitled to a job at the completion of the training period; and, (6) the employer and the trainees understand that the trainees are not entitled to wages for the time spent in training.

The appellate court found each of the six criteria were met in the case of the externships and upheld the trial court’s dismissal of the students’ claims.

Read the case here.

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