By: Kait Trizna
Sit back and collect your thoughts for a moment before you hire those summer interns. If you keep reading, you’ll learn more about the basics of employing interns under the new federal rule and tips for maintaining a compliant internship program. If you don’t keep reading, you’ll probably do it wrong, end up fighting the law, and let’s face it: authority always wins. That was (one of) the last Mellencamp puns, I swear.
Who, What, When
On January 5th, the U.S. Dept. of Labor (“DOL”) announced it will no longer use the Obama-era six factor test to determine whether interns and students working at for-profit employers are employees and thus entitled to minimum wages and overtime pay under the Fair Labor Standards Act (“FLSA”). Instead, the DOL adopted a primary beneficiary test for determining whether interns are employees who must be paid in accordance with the FLSA.
Out with the Old and in with the New
The previous DOL test required that six prongs be met for an internship to be unpaid. However, the new test relies on a totality of the circumstances approach which gives private employers greater flexibility to hire unpaid interns.
According to the DOL, courts should consider and weigh the following seven factors to determine whether an intern is an employee under the FLSA:
- 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.
- 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.
In sum, the current test is intended to be flexible and, according to the DOL, not every factor needs to be present. Additionally, none of these factors are yes/no questions. Rather, the test asks the extent to which each factor is met, not whether a factor is met. Super clear, right? Put differently, the ultimate answer depends on the unique circumstances of each case. Also, keep in mind that this development only affects the analysis under federal law. States, cities, and local jurisdictions may impose stricter requirements. How nice.
How to R.O.C.K. your Internship Program in the U.S.A.
If you employ interns:
You should review and revise all program-related documentation (advertising, recruiting materials, policies, intern agreements) to ensure the language is consistent with the DOL’s new primary-beneficiary test.
You should not hire interns on an unpaid basis in order to save costs on jobs that would otherwise go to entry-level employees. Though common practice historically, if you do this, you’re violating federal labor laws and inviting a lawsuit.
Ain’t that America
If you’re still unsure whether your organization’s internship program is compliant, let’s chat. I’m confident a brief discussion will be less expensive than defending (or settling) a lawsuit. It pays to be cautious…unless you’d rather pay up like these guys: Fox Searchlight, Hearst, Condé Nast, Warner Music, NBC Universal, and the list goes on.
Give me a shout at email@example.com or 303-309-6001 to ensure your intern program complies with applicable laws, or to debate John Mellencamp’s rock legend status in American music.
 The FLSA exempts certain people who volunteer to perform services for a state or local government agency or who volunteer for humanitarian purposes for non-profit food banks. The Wage and Hour Division (WHD) also recognizes an exception for individuals who volunteer their time, freely and without anticipation of compensation, for religious, charitable, civic, or humanitarian purposes to non-profit organizations. Unpaid internships for public sector and non-profit charitable organizations, where the intern volunteers without expectation of compensation, are generally permissible.