The U.S. Department of Labor announced in a January 5, 2017 press release that it was scrapping the six-factor test it had used for years to determine whether interns are employees for purposes of the Fair Labor Standards Act and adopting the “primary beneficiary” test favored by a number of U.S. Courts of Appeals.

Under the DOL’s old test, two of the factors suggesting a bona fide internship were “[t]he internship experience is for the benefit of the intern” and “[t]he employer … derives no immediate advantage from the activities of the intern[.]”  A number of federal courts (including the Second Circuit in Glatt v. Fox Searchlight Pictures, Inc., 811 F.3d 528 (2d Cir. 2016), and the Ninth Circuit in Benjamin v. B & H Educ., Inc., — F.3d —, 2017 WL 6460087, at *4-5 (9th Cir. Dec. 19, 2017)) have rejected the six-factor test in favor of the “primary beneficiary” test, which focuses more on the economic realities of the relationship and examines, among other factors, whether the intern or the employer is the primary beneficiary of the relationship.

In its press release, the DOL explained that “going forward, the [agency] will conform to these appellate court rulings by using the same ‘primary beneficiary’ test that these courts use to determine whether interns are employees under the FLSA.  The Wage and Hour Division will update its enforcement policies to align with recent case law, eliminate unnecessary confusion among the regulated community, and provide the Division’s investigators with increased flexibility to holistically analyze internships on a case-by-case basis.”

In connection with its change in enforcement practice, the DOL issued a new Fact Sheet on internship programs under the FLSA.  The Fact Sheet lists seven factors for determining whether an intern is an employee:

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.

No single factor is determinative, and the analysis always depends on the unique circumstances of each case.

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