Department of Labor Announces Change in Intern Test

On January 5, 2018, the United State Department of Labor (“DOL”) announced that it would no longer adhere to the six-factor test originally adopted in 2010 to determine whether or not students can properly be considered interns under the Fair Labor Standards Act (“FLSA”). Many federal courts, including the Second and Ninth Circuit Courts of Appeal, had previously rejected the DOL’s six-factor test, claiming that the test was “too rigid” and failed to properly consider the unique circumstances of each individual workplace relationship. One of the most controversial aspects of the former test was the element that the “employer that provides the training derives no immediate advantage from the activities of the intern; and on occasion its operations may actually be impeded.” This factor was considered by many to be very difficult for employers to meet.

The DOL announced that it will now base determinations on the “primary beneficiary” test, which has been adopted by many federal courts.  According to Fact Sheet #71 issued by the DOL this month, the elements of the “primary beneficiary” test are considers at the following factors:

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.

The primary beneficiary test is a “flexible” test and “no single factor is determinative….whether an intern or student is an employee under the FLSA necessarily depends upon the unique circumstances of each case.” Notably, the element that the “employer … derive[] no immediate advantage from the activities of the intern; and on occasion its operations may actually be impeded”, which was part of previous test, is not included in the updated test. 

Coverage:  All employers who employ interns.

Effective:   Already in effect (January 5, 2018).

Action Required:  As always, please contact your HR Business Partner if you have any questions.