Revised Rules for Unpaid Internships

The United States Department of Labor (“DOL”) has released its Field Assistance Bulletin No. 2018-2, which adopts a new seven factor “Primary Beneficiary” test several federal appeals courts have used to determine whether unpaid interns at for-profit employers are employees for purposes of the Fair Labor Standards Act (“FLSA”). Interns that are determined to be employees must be paid (1) at least minimum wage; and (2) overtime for hours worked beyond 40 in a week.

The DOL also unveiled a corresponding Fact Sheet, here:

The DOL previously used a six-factor test for determining whether an intern could be unpaid. The DOL required all six factors to be met or else the intern had to be paid as an employee.

The Primary Beneficiary test does not require all of the factors to be met. It provides a more flexible balancing of those factors. Employers might view this change as both good news and bad news, because uncertainty goes along with the flexibility.

The new Fact Sheet reads, in part:

“In short, this test allows courts to examine the “economic reality” of the intern – employer relationship to determine which party is the “primary beneficiary” of the relationship. Courts have identified the following seven factors as part of the test:

  1. The extent to which the intern and the employer clearly understand that there is no expectation of compensation. Any promise of compensation, express or implied, suggests that the intern is an employee—and vice versa.
  2. The extent to which the internship provides training that would be similar to that which would be given in an educational environment, including the clinical and other hands-on training provided by educational institutions.
  3. The extent to which the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit.
  4. The extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic calendar.
  5. The extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning.
  6. The extent to which the intern’s work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern.
  7. The extent to which the intern and the employer understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship.”

Recommendation to Business Owners and Executives:

Connect with a knowledgeable employment lawyer who is licensed to practice in your state, and get help updating your internship program.

Michael Oswald

Please note: the above post contains educational information. It is not intended as legal advice. Engage an attorney who is licensed in your state to get advice on dealing with any specific legal issue.

© 2018 Michael S. Oswald



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