On January 5, 2017, after four different appellate courts expressly rejected the DOL’s six part test for determining whether interns of for-profit employers are employees under the FLSA, the DOL announced that it would no longer use the six part test. Instead, in keeping with the appellate courts’ rulings, the DOL will use the “primary beneficiary test” to determine whether interns are employees, and thus entitled to be paid under the FLSA.
The “primary beneficiary test” looks at seven factors that concentrate on whether students receive or expect to receive education and training, instead of compensation, for their work. The seven factors are:
- 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.
- 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.
- The extent to which the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit.
- The extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic calendar.
- The extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning.
- 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.
- 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’s press release states: “The Wage and Hour Division will update its enforcement policies to align with recent case law, eliminate unnecessary confusion among the regulated community, and provide the Division’s investigators with increased flexibility to holistically analyze internships on a case-by-case basis.”
Fundamentally, employers must make sure that internships are about education and hands-on learning, that interns are not peforming the same work as paid employees, and that potential interns understand that they will not be compensated during their internships.