DOL Ditches Prior Intern Test in Favor of More Company-Friendly Test

600px-US-DeptOfLabor-Seal_svgLast week, the Department of Labor (DOL) issued a news release stating that going forward, it will use the seven-factor “primary beneficiary” test — set forth by the 2nd Circuit and applied by other Circuits — to determine whether interns working at for-profit employers are employees under the Fair Labor Standards Act (FLSA), expressly rejecting its previous test from 2010.

The “primary beneficiary” test that will now be applied by the DOL analyses the following seven, non-exhaustive 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.

The DOL noted that this new test will be applied in a “flexible” manner, and that whether an intern qualifies as an employee under the FLSA depends on the unique circumstances of each case.

It is widely agreed that the primary beneficiary test is easier for companies to satisfy than the DOL’s prior test, but it’s too early to tell how much of an impact this change will be. If you do have an internship program, it’s a great time to review intern classifications and make sure that they are being treated properly under employment laws.



Unpaid Internships – Turning up the heat

The summer of 2013 is likely to be remembered as the year the unpaid interns pushed back. For years, eager students and recent graduates have taken unpaid positions. However, with companies’ bottom lines tightening, workloads burgeoning and more experienced workers looking for a way to open doors, the line between unpaid intern and entry level employee have begun to blur. This summer, some of those interns have fought back — and won. In June, interns who worked on the movie Black Swan won a verdict against Fox Starlight Pictures that has sent shockwaves around the business community. Cases have also recently been filed by interns against Conde Nast Publications and Sony Records, and two interns who lost their case before the Court of Appeals have asked the Supreme Court to rule on when an intern has a legal right to minimum wage.

The fact is that, regardless of whether they are called employees or interns, workers are entitled to minimum wage and overtime unless they can properly be classified as “trainees” or “non-employees.” And contrary to popular opinion, the fact that an intern is receiving credit for their internship doesn’t automatically exempt them from wage and hour requirements. Companies that improperly fail to pay interns face damages under state and federal law.

We have been talking about the risk of unpaid interns for years, but the cases this summer have turned up the heat. As you begin putting together 2014 budgets, take a closer look at what – if anything – interns are set to be paid to confirm that your company is in compliance.