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DOL adopts ‘primary beneficiary test’ to evaluate whether interns are employees under FLSA
By Lauren Harris on January 26, 2018 at 1:38 PM

Female intern carrying coffees in a hallwayThe U.S. Department of Labor (DOL) this month issued its revised Fact Sheet #71 on “Internship Programs Under the Fair Labor Standards Act” outlining that the agency will rely on the court-approved “primary beneficiary test” to determine whether an intern should be considered an employee under the Fair Labor Standards Act (FLSA). 

The release of the revised Fact Sheet comes on the heels of the decision from U.S. Court of Appeals for the Ninth Circuit in Benjamin v. B&H Education, Inc., 877 F.3d 1139 (9th Cir. 2017), which expressly rejected the DOL’s six-part test.  The Ninth Circuit became the fourth appellate court to reject the DOL’s “too rigid” methodology. 

The revised Fact Sheet explains that the agency will now use the “primary beneficiary test” to determine whether an intern or student should be considered an employee under FLSA, thus requiring the employer to pay minimum wage and overtime pay.  The test looks to the “economic reality” of the intern-employer relationship and turns on which party is the “primary beneficiary” in the relationship.  The test measures the existence and degree of the following seven factors in the relationship, with no single factor being determinative:

  1. Expectation of compensation;
  2. Training similar to educational environment;
  3. Ties to formal education program;
  4. Accommodation of academic commitments;
  5. Limited duration;
  6. Work complements rather than displaces work of paid employees; and
  7. Expectation or entitlement to paid job at conclusion.

While the DOL’s shift provides more clarity to employers in determining whether they have bonafide unpaid internship programs, the analysis is still very fact-based and depends upon the unique circumstances of each intern position. If you have any questions regarding your internship program or how this shift impacts your business, please contact any of the attorneys in our Employment & Labor Group.

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