Its summer and, for interns, it is time to start working on finding The DOL has issued a new Fact Sheet #71 supporting a shift in enforcement policies related to the determination of whether an internship in the "for-profit" sector could be unpaid. Does your company use unpaid interns? The primary beneficiary test does not include a rigid set of requirements, but a non-exhaustive list of factors to determine who is the primary beneficiary of the internship. This new guidance provides nonprofits with the opportunity to stop paying interns or to hire unpaid interns, provided certain conditions are met. Copyright 2020 Tristan & Cervantes. First, they look at the extent Even assuming some questions may be answered with generalized proof, the Court held, they are not more substantial than the questions requiring individualized proof.. By adopting the "primary beneficiary" test, the DOL has switched gears from its insistence that all six factors of the test it originally propounded in the late 1960sand most recently reiterated in a Fact Sheet published in 2010must be present for an internship to be unpaid. It just needs to be performed to ensure the intern is not being unfairly unpaid. 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 Divisions investigators with increased flexibility to holistically analyze internships on a case-by-case basis.. Interns. For example, both require that the intern does not displace regular employees and that the employer provide training similar to that which would be provided in an educational environment. And unlike the . The test also allows for a weighing and consideration of the factors, rather than requiring that all factors be met. The new test should provide more flexibility for employers. 505 20th Street North, Thus, nonprofits should exercise caution in reclassifying interns from an FLSA-covered status to a non-covered status (i.e., from paid to unpaid status) and should not assume that simply because an intern receives credit from his or her educational institution the internship automatically may be unpaid. Both the intern and the employer should have a clear understanding of the relationship to reduce potential liability for unpaid wages. The extent to which the interns work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern. First, it focuses on the benefit the intern gets from the internship. Any promise of compensation, express or implied, suggests that the intern is an employee-and vice versa. an employee, that person is entitled to both minimum wage and overtime Each inquiry will be highly individualized, and if an intern, trainee, or student is found to be an employee, he/she will be entitled to both minimum wage and overtime compensation under the FLSA. The extent to which the internships duration is limited to the period in which the internship provides the intern with beneficial learning. 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. which means that no one factor is determinative. The factors include: the extent to which the intern and the employer clearly understand that there is no expectation of compensation; The intern does not displace regular employees but works under close supervision of existing staff. Courts also consider the understanding between the employer and 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. B & H Educ., Inc., F.3d , 2017 WL 6460087, at *4-5 (9th Cir. Courts have used the "primary beneficiary test" to determine whether an intern or student is, in fact, an employee under the FLSA. Under this test, the economic realities of the . This is to determine which party is the "primary beneficiary" of the relationship. The extent to which the internship is tied to the interns formal education program by integrated coursework or the receipt of academic credit. Internship positions are typically between 3-6 months unless part of a University-related program. the perfect internship opportunity. or viewing does not constitute, an attorney-client relationship. 505 20th Street North Because most internship programs involve some element in which the intern performs job tasks from which the nonprofit benefits, most nonprofit employers were required to pay their interns, even where the interns' job tasks were designed primarily to allow the interns to learn or hone job skills. 2015), opinion amended and superseded, 811 F.3d 528 (2d Cir. July 2, 2015). On January 5, 2018, the U.S. Department of Labor ("DOL") clarified its position regarding paid and unpaid internships. 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. According to this test, an intern is a primary beneficiary if: ACCP Summit (Association of Corporate Citizenship Professionals), February 20, 2023 2. The U.S. Court of Appeals for the Ninth Circuit has joined the Second and Eleventh Circuits in rejecting the Department of Labor's restrictive test for intern v. employee status under the Fair Labor Standards Act, instead adopting a "primary beneficiary" test. When it is determined that the intern is pay under the FLSA. - 2023 National Business Officers Association Annual Meeting. Any promise of compensation, express or implied, suggests that the intern is an employee-and vice versa. 972.893.9340. Product, Tort, & Insurance Litigation. The new primary beneficiary test adopted by the DOL certainly relaxes the criteria for establishing an unpaid internship under the FLSA and therefore is good news for employers who wish to establish such programmes. Any promise of compensation, express or implied, suggests that the intern is an employeeand vice versa. This material is provided for informational purposes only. A: The primary beneficiary test looks at whether the employer or the employee is the primary beneficiary of the relationship. Focused on labor and employment law since 1958, Jackson Lewis P.C. The interns urged the Court to adopt a test granting them employee status whenever the employer receives an immediate advantage from their work. The primary beneficiary test factors include (1) whether both the employer and the intern understand that the intern will not be compensated; (2) whether the internship provides training similar to training that would be provided in an educational environment; (3) whether the internship results in academic credit or is otherwise part of the intern's coursework; (4) whether the internship corresponds with the intern's academic calendar; (5) whether the internship ends after the intern has gained the educational benefits of the internship program; (6) whether the work complements, rather than displaces, the work of employees and provides significant education benefits to the intern; and (7) whether the employer and intern understand that the intern is not entitled to a paid job at the end of the internship. The information on this website is for general information purposes only. Although the test newly adopted by DOL is less rigid than its predecessor, both tests contain some of the same or similar factors. The extent to which the internship is tied to the interns formal education program by integrated coursework or the receipt of academic credit. The Second Circuit has jurisdiction over Connecticut, New York, and Vermont. The U.S. Department of Labor (DOL) adopted a new test, the primary beneficiary test, for determining whether interns and students are in fact employees under the Fair Labor Standards Act (FLSA). The primary beneficiary test is a flexible . To deactivate the use of third party advertising cookies, you should alter the settings in your browser. If you are an unpaid intern, but feel like your employer is unfairly benefiting from your relationship in the Fort Worth, Texas area, contact one of our experienced employment attorneys to discuss your specific situation. If the employer is the primary beneficiary, the intern must be compensated as an employee under at least the minimum wage provisions of the FLSA. If the employer is the primary beneficiary, the student/intern is an employee and must be paid. 3. The extent to which the internship is tied to the interns formal education program by integrated coursework or the receipt of academic credit. The extent to which the interns 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. The primary beneficiary test is more flexible. The extent to which the intern and the employer clearly understand that there is no expectation of compensation. In lieu of this six-factor test, the DOL has now adopted the primary beneficiary test to examine the economic reality of the intern-employer relationship, and determine which party is the primary beneficiary of the relationship. 3. For years employers relied on the Department of Labor's ("DOL") "Intern Fact Sheet" when categorizing an intern as unpaid or ineligible for compensation under the Fair Labor Standards Act ("FLSA"). The Fact Sheet lists seven factors for determining whether an intern is an employee: No single factor is determinative, and the analysis always depends on the unique circumstances of each case. as an employee. 7. Unlike the previous 6-factor rubric, the "primary beneficiary test" is flexible. In adopting the primary beneficiary test, the DOL indicated that this is meant to be a flexible test with no determinative single factor. at Michel | King . The court stated, "Under the primary beneficiary test we have set forth, courts must consider individual aspects of the intern's experience." Therefore, and referring back to the reasons that the court ruled that FRCP 23 certification was improper, it vacated the Glatt district court's order conditionally certifying a rule 23 class. 'Primary Beneficiary' Test Determines Employee Status of Unpaid Interns, Federal Appeals Court Rules By Richard I. Greenberg and Noel P. Tripp August 10, 2015 How should an employer determine whether unpaid interns at a for-profit employer are employees under the Fair Labor Standards Act entitled to compensation for services provided? The U.S. Department of Labor announced in a January 5, 2018 press release that it was scrapping the six-factor test it had used for years to determine whether interns are employees for purposes of the Fair Labor Standards Act and adopting the "primary beneficiary" test favored by a number of U.S. Courts of Appeals. Recipients should consult with counsel before taking any actions based on the information contained within this material. This information is not intended to create, and receipt The internship experience is for the benefit of the intern. Nonprofit employers should be aware that on January 5, 2018, the Department of Labor (DOL) discarded the stringent test previously used to determine whether an intern is an "employee" under the Fair Labor Standards Act (FLSA) in favor of the more flexible "primary beneficiary" intern test utilized by numerous federal courts. The Court provided the following non-exhaustive set of considerations, none of which alone is dispositive, that must be weighed and balanced: Such a flexible standard, the Court said, reflects a central feature of the modern internshipthe relationship between the internship and the interns formal education.. They will now use the "primary beneficiary" test for determining "whether interns are employees" under the Fair Labor Standards Act ("FLSA"). online or by calling us at (205) 265-1880. How should an employer determine whether unpaid interns at a for-profit employer are employees under the Fair Labor Standards Act entitled to compensation for services provided? In adopting the primary beneficiary test, the DOL indicated that this is meant to be a flexible test with no determinative single factor. the intern complements rather than replaces the work of a paid employee. December 3, 2019. 2015) (summary order), the court announced a new "primary beneficiary test," identified seven non-exhaustive factors relevant to classifying interns as employees in the for-profit sector, and rejected strict application of the six factor test promulgated by the United States Department of Labor (DOL). In connection with its change in enforcement practice, the DOL issued a new Fact Sheet on internship programs under the FLSA. provides the type of training that would be provided in an educational Id. Companies that choose to rely on unpaid internships should revise their internship program materials to ensure that their program conforms to the new test being utilized by the DOL. See Glatt v. Fox Searchlight Pictures, Inc., 791 F.3d 376 (2d Cir. The extent to which the intern and the provider of the internship understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship. Any promise of compensation, express or implied, suggests that the intern is an employee. U.S. Earlier this month, the U.S. Department of Labor announced it will now use the primary beneficiary test" to determine whether an intern must be paid. The court considers the following seven factors in its analysis: 1. person should legally be considered an unpaid intern or a paid employee. the workplace, or if you have any other questions regarding your employment For each factor, employers must consider who is the primary beneficiary. As the DOL put it: Courts have used the "primary beneficiary test" to determine whether an intern or student is, in fact, an employee under the FLSA. The extent to which the internships duration is limited to the period in which the internship provides the intern with beneficial learning. It is not intended to constitute legal advice nor does it create a client-lawyer relationship between Jackson Lewis and any recipient. at 386. Second, it accords courts the flexibility to examine the economic reality as it exists between the intern and the employer.. 150 North Wacker Drive, Suite 1550 The U.S. Department of Labor (DOL) adopted a new test, the primary beneficiary test, for determining whether interns and students are in fact employees under the Fair Labor Standards Act (FLSA). The "primary beneficiary test" is considered a flexible test, which means that no one factor is determinative. 2015 Jackson Lewis P.C. in their desired profession, including the significant networking opportunities As of January 5, 2018, the DOL abandoned its previous approach to the issue and accepted the "primary beneficiary test" as the standard for determining whether an individual is an employee under the FLSA. In this regard, the Second Circuit suggested that the following factors be considered: The extent to which the intern and the employer clearly understand that there is no expectation of compensation. they can have, employers may still be on the hook for paying wages. With the announcement, the DOL also updated Fact Sheet #71: Internship . Since the primary beneficiary test relies on more of a totality of the circumstances approach than the previous six-factor test, unpaid internships may increase in prevalence as compared to recent years. If the internship The touchstone of the primary beneficiary test recognized by the Second Circuit is that it weighs the tangible and intangible benefits provided to the intern against the intern's contribution to the company's productivity. And in order to address the particular subjectivity, the DOL has created the "Primary beneficiary test" for ensuring that an intern is getting more benefit than an employer while doing an unpaid internship. The extent to which the intern and the provider of the internship clearly understand that there is no expectation of compensation. Product Liability; Tort Defense; Insurance Coverage & Bad Faith; Public Finance We work with asset managers, private equity and venture capital firms, Fortune 500 companies, major sports leagues, entertainment industry legends and other industry-redefining companies. 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. Posted December 29, 2017. ficiary test." 15. 2016). By subscribing to our blog, you acknowledge that you have read our. The "primary beneficiary test" focuses on the educational and academic aspects of internship programs and uses a series of seven nonexclusive factors to determine whether the worker qualifies as an intern such as: (i) whether the parties understand there is no expectation of compensation; (ii) whether the internship provides training . This Fact Sheet lists seven factors for determining whether an . However, employers should still re-evaluate how they structure and draft the terms of their internship programs to ensure compliance. The academic nature of the relationship is very important. See Fact Sheet #71: Internship Programs Under the Fair Labor Standards Act . Suite 1650, - 2023 National Business Officers Association Annual Meeting, February 21, 2023 The employer that provides the training derives no immediate advantage from the activities of the intern, and on occasion, its operations may actually be impeded. for employers is whether they have to pay their interns? Do You Have an Internship Program? how do you determine whether an intern must be paid for their work? Courts have identified . Jackson Lewis attorneys are available to answer inquiries regarding this and other workplace developments. The DOL issued a new Fact Sheet on internship programs under the FLSA. The FLSA is a federal law that requires employers to pay employees minimum wage for work performed, and overtime pay for hours worked over forty hours per week. Unlike the DOLs previous test, the primary beneficiary test is a flexible test and no single factor is determinative. the so-called intern is the primary beneficiary of the relationship. of the intern-employer relationship to decide whether the employer or The court devised a non-exhaustive set of considerations for the primary beneficiary test; no one factor is dispositive and relevant . 7. 's 950+ attorneys located in major cities nationwide consistently identify and respond to new ways workplace law intersects business. Nonprofit employers with interns, whether paid or unpaid, should re-examine their interns' FLSA coverage. interns are willing to work for free in order to gain invaluable experience Wage Payment Guidance Updated as Pandemic and Telework Continue, Building Your Sandbox: Tools to Develop an International Giving Program, ACCP Summit (Association of Corporate Citizenship Professionals), - 2023 National Business Officers Association Annual Meeting, Improving Financial Sustainability Through School Mergers and Collaborations, Andrew Price Named Trademark Prosecutor of the Year by the Bar Association of the District of Columbia, Jennifer Malloy Joins Venables Advertising and Marketing Group in Los Angeles, Esteemed Estate Planning Group Joins Venables Baltimore Office. In addition, the Court vacated the district courts certification of a class action under New York law and a collective action under the FLSA. The agency announced on January 5, 2018, that it was adopting the "primary beneficiary" test to determine the employee status of interns and students. Conceivably you could check less than seven boxes and still have an intern, rather than an employee. For a worker to qualify for an unpaid internship, the following criteria described below must be applied. It's good to have documentation but . 2 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. rights, please contact the experienced Birmingham employment law attorneys First, it focuses on what the intern receives in exchange for his work, the Court said. Of course, other federal appellate courts may wind up disagreeing with the DOL's direction and states may have more rigorous tests for unpaid interns under their own wage and hour laws. The "primary beneficiary" test was adopted by the Federal Circuit courts to determine whether an intern or student is, in fact, an employee under the Fair Labor Standards Act (FLSA). The extent to which the internships duration is limited to the period in which the internship provides beneficial learning to the intern. Professional Licensing Board Representation. Courts have used the "primary beneficiary test" to determine whether an intern or student is, in fact, an employee under the FLSA. Now that summer internships are beginning, here is a reminder of recent updates regarding unpaid internships. the interns school commitments or corresponds to the academic calendar, The extent to which the internship provides training similar to that which would be given in an educational environment, including the clinical and other hands-on training provided by education institutions. work depends on whether the intern is legally considered an employee. Requires the intern to execute appropriate documentation that expressly states the internship is unpaid and that the intern is not entitled to a paid job at the conclusion of the internship; Requires, as eligibility factor, credit from the intern's educational institution; Involves job tasks that are primarily not administrative in nature to avoid the perception that the intern is performing the work of (i.e., displacing) other employees; and. Its announcement comes in the wake of the 9th Circuit's adoption of the test, joining the 2nd, 6th, and 11th Circuits. The Court explained that even where a provider of internships has a policy of replacing paid employees with unpaid interns, it is far from certain that every intern would prevail on a claim that he or she was an employee under the primary beneficiary test. Respond to new ways workplace law intersects business since 1958, Jackson Lewis attorneys are to. 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