Tag Archives: Unpaid Internships

NEW GUIDANCE — DOL Issues New Guidelines Regarding Intern vs. Employee Question

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:

  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 coursework 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 complements, 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.

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.

When Is An Intern Actually An Employee?

It has been common practice for certain industries to hire unpaid interns for entry level jobs, both for cheap labor and to provide the intern will valuable “work experience.”  This practice may be changing soon.  Discovered by plaintiff’s attorneys as a seemingly untapped spring of potential lawsuits, interns are now seeking unpaid wages and penalties against companies that utilized their services but did not pay them.

In Glatt v. Fox Searchlight Pictures, Inc., a federal court was recently asked to determine if interns were in fact employees owed back pay for unpaid wages and rest and meal breaks not taken.  In its holding the court stated that the test for whether an intern is an employee is, if the internship relationship “primarily benefits” the intern, then the relationship is truly and internship.

In determining whether the interns “primarily benefited” from the relationship, the court listed several factors including the extent to which the interns and the employer understood that there was no expectation for compensation, the extent to which the internship provides training similar to that given in an educational environment including clinical training, the extent to which the internship is connected to the interns’ formal education, the duration of the internship, and the extent to which the interns’ work complements, rather than displaces, the work of paid employees.

As seen from this list, according to the court, an internship should have some degree of entwinement with the intern’s formal education and should be clearly understood by all parties involved to be an unpaid experience to supplement education rather than free labor.

Employers who utilize unpaid interns should be careful to ensure that interns fully understand that no compensation will be paid for their work and that any work performed, is with the intent to further their education and experience.