On January 5, 2018 the U. S. Dept. of Labor announced in a press release a new test to determine whether interns and students working in “for-profit” companies are entitled to minimum wage and overtime pay under the Fair Labor Standards Act (FLSA).
The six-factor test will no longer be used and the “primary-beneficiary” test will be adopted as the test favored by a number of U.S. Courts of Appeals. The “primary-beneficiary” test focuses more on the economic realities of the relationship and examines such other factors to determine whether the intern or the employer is the primary beneficiary of the relationship.
The DOL issued a new Fact Sheet (#71) for Unpaid Interns and Students:
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.
Analysis of these circumstances will be on a case-by-case basis with no single factor being determinative.
***Unpaid internships for public sector and non-profit charitable organizations, where the intern volunteers without the expectation of compensation, are generally permissible.