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Unpaid Externships Comply With FLSA if Academic Credit Received

By William Peacock, Esq. on February 08, 2013 | Last updated on March 21, 2019

This may seem obvious, but if you are receiving academic credit for an unpaid internship, you probably will not succeed in bringing a Fair Labor Standards Act (FLSA) claim. However, seeing as unpaid internships and externships are a hot topic right now, it’s worth perusing this unpublished Eleventh Circuit decision, Kaplan v. Code Blue Billing, Inc.

The ungrateful (kidding) student-intern plaintiffs were enrolled in MedVance Institute’s Medical Billing and Coding Specialist program. One of the graduation requirements was to complete externship work, which the plaintiff did with the multiple defendants.

The lower court tossed the case via summary judgment, citing FLSA. The Eleventh Circuit affirmed, citing the well-known six factor test for unpaid internships derived from Portland Terminal:

  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 externship training was similar to what the plaintiffs learned at MedVance, it was for their benefit and required for their degree, they supplemented rather than replaced current employees, and the defendants received (arguably) no benefit from the plaintiffs' presence, as the staff took time out to train them and review their work. There was also no job provided or promised at the end. Finally, the arrangement was made with everyone aware of its unpaid nature.

Sounds like a textbook FLSA-compliant internship, right?

We do have to question the court's stated "economic realities" when discussing the employer's benefit. Though the regular workers certainly did take time off to train interns and review their work, the true reality is this: nearly no business is going to provide internships that do not benefit them somewhat. That "no immediate advantage" prong is a little unrealistic, isn't it? For-profit corporations typically make decisions based on the bottom line.

You'll also notice that the widely-used six factor test doesn't mention subbing academic credit in lieu of pay. While stopping short of explicitly saying, "You got academic credit - stop whining," and does not mention credit as a determinative factor, the court does point out that they received credit multiple times.

Is the court tacitly indicating that if you receive academic credit, and the employer's benefit isn't too obvious, an unpaid internship will comply with FLSA?

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