By Mark D. Nelson
The U.S. Department of Labor ( “DOL”) recently announced that it is abandoning its six-factor test and will use the “primary beneficiary” test first enunciated by the 2nd Circuit in Glatt et al. v. Fox Searchlight Pictures, Inc. et al., 811 F.3d 528 (2d Cir. 2015) The DOL stated the primary beneficiary test “eliminate[s]unnecessary confusion among the regulated community” and will provide DOL’s investigators increased flexibility to “holistically analyze internships on a case-by-case basis.
The DOL’s website provides a Fact Sheet that identifies seven factors employers should consider when determining whether an intern is an employee:
- The extent to which the intern and the employer clearly understand that there is no expectation of compensation, and any promise of compensation, express or implied, suggests that the intern is an employee.
- 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 course work or the receipt of academic credit.
- The extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic year.
- 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 an entitlement to a paid job at the conclusion of the internship.
When applying the new test, employers should keep in mind that no single factor is decisive. Each analysis should apply all seven factors to the facts and circumstances of each internship.
The DOL’s decision to adopt the primary beneficiary test comes as welcome news for employers. Specifically, the primary beneficiary test seems to allow employers to utilize interns to the extent the intern understands the internship will not be paid, is conducted without a guarantee of a paid job at its conclusion, and provides hands-on training, among other things. When considering bringing on an intern, an employer would do well to define the parameters of the internship in writing, and should further consider putting to writing an agreement with the intern reflecting the unpaid nature of the internship.