Return of the Unpaid Intern

Return of the Unpaid Intern

January 9, 2018

On January 5, 2018, the U.S. Department of Labor (“DOL”) abandoned its six-factor test for assessing whether a worker is an intern or an employee, for purposes of coverage under the Fair Labor Standards Act (“FLSA”). The six-factor test was conjunctive, and difficult to apply—particularly the factor that the employer gains “no immediate advantage from the activities of the intern.”

Now, the DOL has adopted from several federal appellate courts the “primary beneficiary test.” The new seven-factor test, as framed by the Second, Sixth, Ninth, and Eleventh Circuits, is praised as a more flexible, holistic approach, which allows courts to examine the “economic reality” of the intern-employer relationship to determine the “primary beneficiary” of the internship. The seven, non-exhaustive factors encourage courts to consider promises of compensation; the educational nature of the training; the relationship between the internship and the intern’s formal education program; whether the internship corresponds to an academic calendar or otherwise accommodates the intern’s educational commitments; the duration of the internship; whether the intern’s work complements or displaces the work of paid employees; and the parties’ understanding that the internship does not necessarily lead to a paid job upon its conclusion.

The DOL urges courts to examine the unique circumstances of each case, rather than employ an all-or-nothing approach. Furthermore, the DOL’s Wage and Hour Division plans to update its enforcement policies to detail the “primary beneficiary” test, thereby eliminating confusion for employers, courts, and DOL investigators interpreting the new test.

In accord with the recent changes in federal employment policy, the new intern-versus-employee test is more employer-friendly. Still, employers should be aware of state law and whether their states employ a stricter version of this test.