4 minute read | January.10.2018
As part of its revision of Obama-era policies, the U.S. Department of Labor (“DOL”) recently announced a new test for assessing whether interns qualify as employees under the Federal Labor Standards Act (“FLSA”). The agency’s adoption of a “primary beneficiary” test aligns the DOL with several circuit court decisions and provides greater flexibility in analyzing intern-employer relationships under federal law.
The FLSA requires “for-profit” employers to pay employees for their work. Interns, however, may not be classified “employees” under the FLSA—in which case the interns are not entitled to compensation for their work.
The status of interns was a point of emphasis in the Obama administration, as the DOL believed that employers were broadly using intern designations to skirt wage and hour laws. The DOL issued informal guidance in 2010 as to whether interns were employees under the FLSA. According to the DOL’s six-factor test, an intern was an employee unless all of the following factors were met: (1) the internship, even though it included actual operation of the facilities of the employer, was similar to training which would be given in an educational environment; (2) the internship experience was for the benefit of the intern; (3) the intern did not displace regular employees, but worked under close supervision of existing staff; (4) the employer that provided the training derived no immediate advantage from the activities of the intern; and on occasion its operations may actually have been impeded; (5) the intern was not necessarily entitled to a job at the conclusion of the internship; and (6) the employer and the intern understood that the intern was not entitled to wages for the time spent in the internship.
Since the DOL’s 2010 guidance, four federal appellate courts have rejected the DOL’s six-part test and instead adopted a “primary beneficiary” test to determine whether an intern is an employee under the FLSA. As a result, on January 5, 2018, the DOL announced that “going forward, the [agency] will conform to these appellate court rulings by using the same ‘primary beneficiary’ test that these courts use to determine whether interns are employees under the FLSA. 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.”
Rejecting the all-or-nothing six-factor test, the DOL issued a new Fact Sheet regarding internship programs under the FLSA, listing seven factors to consider for evaluating whether an intern is an employee: