On January 5, 2018, the United States Department of Labor (“DOL”) announced it would be changing the test for determining whether interns and students working for certain employers are entitled to minimum wage and overtime pay under the federal law known as the Fair Labor Standards Act (“FLSA”).
The FLSA requires “for-profit” employers to pay employees for their work. However, the FLSA does not require employers to compensate interns and students who are not deemed to be “employees.” A specific set of criteria must be met in order for the intern or student to not be classified as an employee.
Before this year, the DOL used a six-factor test in determining whether an intern or student was an employee. This has now changed. Consistent with a number of federal appellate court decisions, the DOL will utilize a “primary beneficiary” test moving forward. The DOL intends this change to “eliminate unnecessary confusion among the regulated community” and provide “increased flexibility to holistically analyze internships on a case-by-case basis.”
The new primary beneficiary test, modeled after the test stated by the Second Circuit in Glatt v. Fox Searchlight Pictures, Inc., 811 F.3d 528, 536-37 (2d Cir. 2016), requires courts “to examine the ‘economic reality’ of the intern-employer relationship to determine which party is the ‘primary beneficiary’ of the relationship.” The DOL Wage and Hour Division (“Division”) released a fact sheet earlier this year explaining seven factors the Division will consider when applying the new test.
Briefly, the test considers the extent to which: (1) the intern and the employer clearly understand there is no expectation of compensation; (2) the internship provides training that would be similar to that which would be given in an educational environment; (3) the internship is tied to the intern’s formal educational program by integrated coursework or the receipt of academic credit; (4) the internship accommodates the intern’s academic commitments by corresponding to the academic calendar; (5) the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning; (6) the intern’s work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern; and (7) the intern and the employer understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship.
This test is intentionally flexible and no single factor will be determinative. This means that whether an intern or student is considered an “employee” under the FLSA, and therefore entitled to minimum wage and overtime pay, will depend on the circumstances of each case.
If you have any questions or need additional information concerning this topic, please contact Valerie Samuels or any other attorney in our Employment Group.
This Alert is provided for information purposes only, and does not constitute legal advice. According to Mass. SJC Rule 3:07, this material may be considered advertising. ©2018 Posternak Blankstein & Lund LLP. All rights reserved.
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