On January 8, 2018, the US Department of Labor issued a revised Fact Sheet #71: Internship Programs Under The Fair Labor Standards Act, which sets forth an employer-friendly standard for determining whether an intern is considered an employee for purposes of the FLSA.
The new guidance materials were issued in response to the federal courts’ widespread rejection of the DOL’s former guidelines on this issue where the DOL had set forth 6 required factors that must be met before an unpaid intern could be categorized as such and excluded from pay requirements of the FLSA. These old guidelines also emphasized that internships in the “for-profit” private sector “will most often be viewed as employment” unless all 6 required factors were met.
With the revised Fact Sheet #71, the DOL’s position now aligns with that of the Courts who had previously rejected the DOL’s more stringent 6-factor test. Under these new guidelines, the DOL now instructs employers to consider the following 7 factors when determining whether an intern is an employee for purposes of the FLSA:
- 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.
- 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.
- The extent to which the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit.
- The extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic calendar.
- The extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning.
- 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.
- 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.
The DOL has clarified that “no single factor is determinative” and the ultimate answer depends on the “unique circumstances of each case.”
Take home for employers
With this new test, the DOL has made it easier for a private employer to create an unpaid internship program that is lawful under the FLSA provided that an analysis of the 7 factors shows that, on balance, the intern benefits more from the relationship than the employer does. This means that employers need to try to structure their internship programs in such a way that all 7 factors lean toward an internship—rather than an employer-employee relationship.