In past posts here and here, I've discussed the treatment of unpaid interns under federal wage and overtime law. As of January 2018, federal law has shifted towards decreasing the frequency with which unpaid interns are considered "employees." That's significant because federal wage and overtime law only applies to an unpaid intern if the intern qualifies as an "employee" for purposes of federal law.
As noted in my earlier posts, the United States Department of Labor's position on this issue was that most unpaid interns were to be considered employees and thus eligible for protection under federal minimum wage and overtime law, meaning that employers usually needed to pay at least federal minimum wage to most "unpaid" interns. The Department of Labor changed its position in January 2018. It did so because an increasing number of federal appeals courts (four as of January 2018) had refused to follow the Department of Labor's test regarding the employment status of unpaid interns. Instead, federal courts were apply a test that is more lenient towards employers and doesn't result in so many unpaid interns becoming employees under federal law.
The Department of Labor will now apply the "primary beneficiary" test that federal appeals court had been using. The primary beneficiary analysis considers the economic reality of the relationship between the unpaid intern and the employer to determine which one is the primary beneficiary of the relationship. The Department of Labor will review several factors in determining whether an unpaid intern is truly an employee for purposes of federal minimum wage and overtime law:
- 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.
- 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.
The Department of Labor has instructed that the primary beneficiary test is flexible and that “whether an intern or student is an employee under the FLSA necessarily depends on the unique circumstances of each case.” Moreover, the federal appeals court decisions from which the Department of Labor derived the primary beneficiary test teach that the factors above are not exclusive. Since each situation's unique, there may be other considerations that are pertinent to the "primary beneficiary" analysis.