Since 2010, the U.S. Department of Labor (DOL) used a six-factor test to determine whether an intern was an employee. Only if an intern satisfied all six factors could the intern be unpaid. This test was firmly applied by the DOL and led to many lawsuits challenging employer classification of unpaid interns.
On January 5, the DOL replaced the six-factor test with the “primary beneficiary” test that several federal appeals courts have adopted. This new test requires a determination of whether the employer or the intern is the primary beneficiary of the relationship.
If the employer is the primary beneficiary, the intern must be paid, but if the intern is the primary beneficiary, the intern may be unpaid. The new test includes consideration of the following factors:
- Both parties understand that the intern is not entitled to compensation.
- The internship provides training that would be given in an educational environment.
- The intern’s completion of the program entitles him or her to academic credit.
- The internship corresponds with the academic calendar.
- The internship’s duration is limited to the period when the internship educates the intern.
- The intern’s work complements rather than displaces the work of paid employees while providing significant educational benefits.
- The intern and the employer understand that the internship is conducted without entitlement to a paid job at the internship’s end.
The primary beneficiary test is more flexible than the 2010 six-factor test because, under the primary beneficiary test, no single factor is dispositive. Instead, and as noted in the DOL’s updated Fact Sheet #71: Internship Programs Under the Fair Labor Standards Act (FLSA), “whether an intern or student is an employee under the FLSA necessarily depends on the unique circumstances of each case.” However, employers are cautioned that, while the new test is less stringent, unpaid interns, no matter how willing they are to work for free, are not a substitute for paid employees.
Tammy Lamary-Toman, JD, PHR, SHRM-CP, is vice president and employment counsel for the Manufacturer & Business Association.