7 Factor Test for Internship Programs Under FLSA Determinative Changes in 2018

In January of 2018, the U.S. Department of Labor (DOL) adopted a new primary beneficiary test for determining internships of for-profit employers.  Defining internships under the federal Fair Labor Standards Act (FLSA).  Under the old and new primary beneficiary test, interns and students might not be defined as employees.  Non-employee cases, organizations would not have to compensate these students and interns for work performed, during their time at the internship or for projects they complete.  The new test as defined by the courts, is a flexible test, with no single, determining factor.  Each case will be reviewed on its unique basis and duties.

The seven factors of primary beneficiary test for unpaid interns and students:

  1. “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 vice versa.
  2. 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.
  3. The extent to which the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit.
  4. The extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic calendar.
  5. The extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning.
  6. 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.
  7. 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.”[i]

Fact Sheet #71: Internship Programs Under The Fair Labor Standards Act

Old Six Factor Test

SHRM Recommendations for Unpaid Internship:

  1. “We recommend employers get something in writing, preferably with the school as well, that lays out everybody’s expectations,” Orr said. “You’d want to consider having something in writing that says there will be no expectation of compensation, that the internship will be limited to a period of beneficial learning and that there is no promise of a job at the end. If you get acknowledgment of those three things in writing and you follow through on them, you will be in good shape.
  2. If they are in a formal education program, find out if they can get credit for the internship,” Olson agreed. “If the person will get academic credit for the internship, that is very supportive of the internship being to the primary benefit of the intern.”[ii]
  3. Knowledge of local and state legislation is necessary for any HR professional or business owner. Many states follow the old six factor test or have another test, similar to the old six factor test.  This means organizations can fall under both federal and state jurisdiction on FLSA legislation and pay vs. unpaid internship obligations.  “In those cases, employers must typically follow whichever law is most generous to workers.”[iii]

NY State Wage Requirements for Interns in For-Profit Businesses

Wage Requirements for Interns in Not-For-Profit Businesses

My research shows Pennsylvania using the old 6-factor test

These changes can impact your organization.  Many colleges and universities offer credit for internships, work with the career services office prior to hiring an intern and fully the process.  Ensure a contract is in place, agreed upon and expectations are clearly communicated from both the school and workplace.  If your organization does hire an intern, provide feedback throughout to both the intern and academic institution.  In my experience, there is a feedback evaluation form to complete at the end of the internship, as part of the credit approval process.  Students can also be required to write a paper or keep a journal of experiences.  If you are confused on the new requirements, seek guidance.  Ensure that your organization is compliant under all laws.  If you can afford to pay an intern, great.  We all see the amounts of debt students are saddled with upon completion graduation and non-completion.  However, experience paid or unpaid will add value to both academic and professional opportunities for any student.

[i] https://www.dol.gov/whd/regs/compliance/whdfs71.htm

[ii] https://www.shrm.org/resourcesandtools/hr-topics/talent-acquisition/pages/unpaid-internships-new-dol-intern-test.aspx

[iii] https://www.shrm.org/resourcesandtools/hr-topics/talent-acquisition/pages/unpaid-internships-new-dol-intern-test.aspx