Now that summer internships are beginning, here is a reminder of recent updates regarding unpaid internships. The U.S. Department of Labor (DOL) adopted a new test, the “primary beneficiary test,” for determining whether interns and students are in fact employees under the Fair Labor Standards Act (FLSA).
The FLSA is a federal law that requires employers to pay “employees” minimum wage for work performed, and overtime pay for hours worked over forty hours per week. However, interns and students may not be considered “employees” under the FLSA, in which case, employers would not be required to compensate them for their work.
Under the previous test, in order for an internship to be unpaid, that internship had to meet the six criteria outlined by the DOL. In lieu of this six-factor test, the DOL has now adopted the primary beneficiary test to examine the economic reality of the intern-employer relationship, and determine which party is the primary beneficiary of the relationship.
The court considers the following seven factors in its analysis:
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.
