The FLSA generally requires
employers to pay employees for their work. Interns and students, however, may
not be “employees” under the FLSA—in which case the FLSA does not require
compensation for their work.
The FLSA exempts certain people
who volunteer to perform services for a state or local government agency or who
volunteer for humanitarian purposes for non-profit food banks. The Department
of Labor Wage and Hour Division (“WHD”) also recognizes an exception for
individuals who volunteer their time, freely and without expectation of
compensation, for religious, charitable, civic, or humanitarian purposes to
non-profit organizations. Unpaid internships for public sector and non-profit
charitable organizations, where the intern volunteers without anticipation of
compensation, are generally permissible.
On January 5 the DOL abandoned an earlier test and announced that it would
adopt a “primary beneficiary” test favored by the federal courts.
The DOL’s earlier six-factor test made it hard for
employers to lawfully set up unpaid internships. In particular, the six-factor
test required that the employer get “no immediate advantage” from the activities
of the intern.
The New Test for Unpaid Interns and Students
A number of federal courts have
used the so-called “primary beneficiary” test to determine whether an intern or
student is, in fact, an employee under the FLSA. In short, this test allows
courts to examine the “economic reality” of the intern-employer relationship to
determine which party is the “primary beneficiary” of the relationship. Courts
have identified the following seven factors as part of the test:
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
- 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
- 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
- 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.
Courts have described the
“primary beneficiary test” as a flexible test, and according to the DOL no
single factor is determinative. Accordingly, whether an intern or student is an
employee under the FLSA depends on the unique circumstances of each case.
If analysis of these
circumstances reveals that an intern or student is actually an employee, then
he or she is entitled to both minimum wage and overtime pay under the FLSA. On
the other hand, if the analysis confirms that the intern or student is not an
employee, then he or she is not entitled to either minimum wage or overtime pay
under the FLSA. The new test will give employers greater flexibility in setting
up lawful internship relationships.
· Michael R. Lied· Howard & Howard Attorneys PLLC· One Technology Plaza, 211 Fulton Street, Suite 600, Peoria, IL 61602· (309) 999-6311· MLied@howardandhoward.com