We may be in the middle of winter, but it is never too early to start thinking (dreaming?) of summer. Summer is a time for baseball games, relaxing on the beach and walks along the Canalside. Summer is also a time that many employers start to think about bringing on summer help in the form of unpaid internships. Unpaid internships are often thought of a place where young individuals can get their feet wet in a new industry and an employer can get some free labor. However, unpaid internships have often lead to employers getting into legal hot water when a court determines that an intern should not have been unpaid after all. This may change under new guidance from the United States Department of Labor.
First a little history: The Fair Labor Standards Act of 1938 is the bedrock law on which the modern workplace has been built. The FLSA created the 40-hour work week, mandated overtime for certain works and defined what it means to be employed. The definition of employ, while very board, does have exemptions. Historically, courts have found that where a person works only for their own interest, the term employ does not apply, and compensation is not required. As you might have guessed, this exemption is most commonly applied to unpaid internships.
To determine if an intern is excluded from the definition of employ, the DOL developed a rigid 6-part test in 2010. Each part of the six-part test was required to be present for an internship to legally be unpaid. If even one of the six criteria were missing, then the intern would be considered an employee and compensation would be required. The DOL’s six-part test, intentionally, left very little room for interpretation.
The rigidity of this test lead at least four different Courts of Appeals to reject it out of hand. In its place the courts adopted what has been termed the “primary beneficiary test”. This test gave the courts and, by extension, employers some flexibility when determining whether an unpaid intern was in fact an employee.
Due to the widespread rejection of the six-part test by the courts, the DOL announced earlier this month that it would be dropping the six-part test in favor of the “primary beneficiary test” and had developed new guidance for internships.
Unlike the six-part test, the “primary beneficiary test” is meant to be flexible. No single factor is determinative of whether an intern should be paid. This means that even if an internship does not meet each and every criterion of the revised test, it does not necessary prevent the internship from being unpaid. Instead, whether an intern is an employee under the FLSA necessarily depends on the unique circumstances of each case. This should provide some much-needed flexibility to employers making plans for internship programs this summer and beyond.