Tag Archives: Internship

DOL Says Goodbye to Six-Factor Unpaid Internship Test

Contributed by JT Charron, January 10, 2018

On Friday, the Department of Labor abandoned its six-part test for determining whether an intern must be paid, and replaced with the more employer-friendly “primary beneficiary test.” This announcement came less than a month after the Ninth Circuit became the fourth federal appellate court to expressly reject the DOL’s six-factor test in favor of the primary beneficiary test.

Background

Under the Fair Labor Standards Act (FLSA) employers must generally pay employees minimum wage for all hours worked, and overtime for all hours worked over 40 in a week. The FLSA, however, exempts certain individuals from these requirements, including bona fide interns. To determine whether an intern was bona fide, the DOL introduced a six-factor test in 2010, which required that:

  1. The internship was similar to training that would be offered in an education environment;
  2. The internship experience was for the benefit of the intern;
  3. The internship was not displacing a regular employee;
  4. The training provide by the employer to the intern may have impeded the employer’s operations;
  5. The intern was not expecting a permanent position at the conclusion of the internship; and
  6. Both the employer and the intern understand that there was no compensation.

    56243229 - interns wanted internship training trainee concept

    “interns wanted” sign

According to the DOL, if even one of these factors did not apply, the individual was an employee — not an intern — and was required to be paid minimum wage and overtime.

The Primary Beneficiary Test

First articulated in 2015 by the Second Circuit Court of Appeals, the primary beneficiary test is a case-by-case approach that gives consideration to the following seven factors:

  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.

Importantly, no single factor is dispositive, and the employee/intern distinction will be based on the unique circumstances of each case.

Bottom Line

While the primary beneficiary test will provide more flexibility for businesses preparing for the 2018 internship season, employers must still be careful in designing internship programs. As the above factors indicate, the primary beneficiary of any program must still be the intern — not the employer.

Internships: As the Tulips emerge so do the Interns….

Contributed by Julie Proscia

As the tulips begin to pop-up, so do the students applying for internships. In a sluggish economy this is even more prevalent as students are now examining any option that would give them that “experience” edge following graduation. Unpaid internships are a great opportunity but can subject a company to liability if not administered correctly. If administered incorrectly the hopeful doe-eyed unpaid intern can quickly turn into a green-eyed plaintiff looking for back wages and unpaid overtime.

The basic principle behind an unpaid internship is simple – unpaid interns cannot do any work that contributes to a company’s core operations. This includes any tasks that predominately help you run your business, like documenting inventory, filing papers, answering emails, etc. These principles are for “for profit” organizations and are not applicable to “not-for-profit” entities.

So what does that leave? Unpaid interns are allowed to shadow other employees and perform duties that don’t serve a business need.  The Department of Labor has developed six factors that should be used to determine if the unpaid intern is really an intern or an employee.  ALL six factors must be met in order for an internship to be properly classified as unpaid.  If any of the six factors are not met the intern is considered an employee.

Here are the factors:

  1. 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;
  1. Training is for the benefit of the trainee;
  1. The trainees do not displace regular employees, but works under close observation;
  1. The employer that provides the training derives no immediate advantage from the activities of the trainees, and on occasion the employer’s operations may actually be impeded;
  1. The trainees are not necessarily entitled to a job at the completion of the training period; and
  1. The employer and the trainee understand that the trainees are not entitled to wages for the time spent in training.

If an intern fails to meet any of the six factors they should be paid minimum wage for all hours worked and overtime, if overtime is applicable. It is also prudent to require that the intern receive college credit and their internship should be conducted through an approved program at their school or university. The latter will not absolve the company from wage and hour liability if the factors are not met, but it will go a long way in protecting the employer if questions are raised.