The DOL has issued a new Fact Sheet #71 outlining a shift in enforcement policies related to the determination of whether an intern in the “for profit” sector is entitled to minimum wage and overtime pay under the Fair Labor Standards Act.
The new “primary beneficiary standard” used by several federal courts and now adopted by the DOL includes seven factors to help employers determine whether a student or an intern at a for-profit business is considered an employee under the Fair Labor Standards Act.
On Jan. 5, 2018, the U.S. Department of Labor (DOL) announced it would update its enforcement policies related to its test for determining whether interns and students are employees at for-profit businesses under the Fair Labor Standards Act, the federal law governing covered employers on issues related to minimum wage, overtime, record keeping, and child labor. This follows a decision by the U.S. Court of Appeals Ninth Circuit Court, the most recent court to reject the DOL’s prior six-factor test.
The now-abandoned six-factor test required that all criteria under the test be met for an internship to be unpaid. Criteria included, in part, that the internship mirror the type of instruction received in a classroom setting, the experience was for the benefit of the intern, and the internship did not displace regular employees. Additionally, the business providing the internship could not derive any immediate advantage from the activities of the intern.
This most recent court decision follows several other federal and appellate court decisions that rejected the six-factor DOL test in favor of a “primary beneficiary standard," now adopted by the DOL.
The new standard has seven factors (see below) for employers to consider when determining whether an intern at a for-profit business is an employee under the FLSA. No single factor is determinative but rather the determination will be entirely dependent on the circumstances of each case.
As the DOL stated in its press release, “The Wage and Hour Division will 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.” If it’s determined that an intern or student is an employee under the Fair Labor Standards Act, then they are entitled to both minimum wage and overtime pay.
Employers are reminded to consider that the new guidance is based on federal law and enforcement policies only, and a careful assessment of applicable state and local laws should be conducted prior to establishing and/or continuing unpaid internships. Employers are also encouraged to review any existing internship programs and supporting agreements, and adjust accordingly for continued compliance.
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