U.S. Department of Labor Clarifies When Interns are Subject to the Fair Labor Standards Act

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In a recent change of position, the Department of Labor (“DOL”) has endorsed a new standard for determining when an unpaid intern is entitled to compensation as an employee under the Fair Labor Standards Act (“FLSA”).  We previously reported on an earlier DOL effort to tighten up the restrictions on the use of unpaid interns.  It looks like the DOL has decided to change course.

By way of further background, the United States Supreme Court has yet to address the issue, but several federal circuit and district courts have attempted to determine the proper standard to assess these situations.  Recognizing that internships are widely supported by the education community, these courts have sought to strike a balance between providing individuals with legitimate learning opportunities and the exploitation of unpaid interns.

In keeping with the rulings of the courts, the DOL, stated last Friday that “the Wage and Hour Division will update its enforcement policies to align with recent case law [and] eliminate unnecessary confusion among the regulated community…”

Accordingly, the DOL rescinded a 2010 Fact Sheet and adopted the primary beneficiary test, which considers the following factors to determine whether an intern or student is, in fact, an employee under the FLSA:

  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 one factor is determinative and, therefore, the inquiry of whether an intern or student is an employee under the FLSA depends upon the unique circumstances of each case. 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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