About WISHRM

By Mike Henckel
 
The U.S. Department of Labor (DOL) has issued new guidance to help employers decide whether workers can be unpaid under their internship programs. The decision comes after the Ninth Circuit Court of Appeals rejected the previous guidance issued by the DOL. The latest ruling from the Ninth Circuit joins similar rulings by the Second, Sixth, and Eleventh Circuits, holding that the old rules were too rigid.
 
With its new guidance, the DOL indicated that it will use the “primary beneficiary” test developed by the Second Circuit to determine the status of potential interns under the Fair Labor Standards Act (FLSA).
 
Case that changed the tide
With the precedent set by the Second Circuit’s decision, the Ninth Circuit outlined a new seven factor-test that was less rigid than the DOL’s six-factor test. Under prior guidance from the DOL, a worker could be considered an unpaid intern only when all six factors were met.
 
The new primary beneficiary test used by the Ninth Circuit is less restrictive, leading the court to conclude that this test “is therefore the most appropriate test for deciding whether students should be regarded as employees under the FLSA.” (Benjamin v. B&H Education)
 
New DOL guidance
In an effort to consider the primary beneficiary and economic reality of the working arrangement, the DOL’s new test considers seven key factors to determine who receives a greater benefit: the intern or the employer. Under the new guidelines, employers should consider each of the following factors:
 

• 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. However, clearly explaining no monetary compensation will be received suggests the intern in not 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.

While employers were previously required to meet the criteria of all six factors, they may now evaluate each factor individually. As a result, the new test allows more flexibility when assessing the intern-employer relationship. Note that each case must be evaluated individually on its unique circumstances.