U.S. Department of Labor Clarifies when Interns Working at For-Profit Employers Are Subject to the Fair Labor Standards Act

On December 19, 2017, the United States Court of Appeals for the Ninth Circuit became the fourth federal appellate court expressly to reject the U.S. Department of Labor’s (DOL) six-part test for determining whether interns and students are employees under the Fair Labor Standards Act (FLSA). The DOL had previously published a six-part test in 2010. Under that test, an intern would be considered an employee unless all of the six factors were met. The Second Circuit was the first to reject the DOL’s test in 2015, opting for a non-exhaustive set of seven factors to consider in what it termed the “primary beneficiary test.”

Following the Ninth Circuit’s decision adopting the primary beneficiary test, on January 5, 2018, the DOL posted a release on its website indicating that going forward, the DOL would also use the primary beneficiary test to determine whether interns are employees under the FLSA. The DOL also advised that its Wage and Hour Division would 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.

The non-exhaustive seven-factor primary beneficiary test used to evaluate whether interns and students should be treated as employees considers the following:

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 course work 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 compliments, 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.

As the Second Circuit held, these factors require a “weighing and balancing of all of the circumstances. No one factor is dispositive and every factor need not point in the same direction for the court to conclude that the intern is not an employee entitled to the minimum wage.” Glatt v. Fox Searchlight Pictures, Inc., 811 F.3d 528, 537 (2d Cir. 2016).  

If you have questions please contact a member of Barrett McNagny's Labor and Employment group.