On January 5, 2018, the U.S. Department of Labor (“DOL”) clarified its position regarding paid and unpaid internships. They will now use the “primary beneficiary” test for determining whether interns are employees under the Fair Labor Standards Act (“FLSA”). The agency has issued a revised Fact Sheet called “Internship Programs under the Fair Labor Standards Act.”
This is a modest change from the 2010 DOL Fact Sheet which presumed interns to be employees entitled to minimum wage and overtime, unless six specific factors were present. In the wake of DOL’s 2010 Fact Sheet lawsuits proliferated over whether interns in the for-profit sector were owed back wages. In these cases, interns have sought to be paid past wages, relying, in part, on DOL’s six-factor test to assert that they are entitled to back pay.
Federal Courts, however, did not embrace the DOL’s 2010 six-factor test finding it to be “too rigid.” Most notably the Second and Ninth Circuits have utilized a more flexible, balancing approach, focusing upon which party – the intern or the business – is the “primary beneficiary” of the relationship using an analysis of seven non-exhaustive factors to weigh and balance in making the determination.
The DOL’s revised 2018 Fact Sheet indicates it will also apply the primary beneficiary analysis. This means that under the FLSA internship programs will be reviewed under a single standard. However, employers should still proceed with caution in implementing or expanding unpaid internship programs and ensure the programs are truly designed to primarily benefit the interns.