Burr & Forman

05.2.2018   |   Articles / Publications

Burr Alert: DOL Adopts the “Primary Beneficiary” Test for Internship Programs

As summer months approach and students begin searching for seasonal employment, many employers are faced with the logistics of internship programs, specifically whether an unpaid internship meets the requirements of the Fair Labor Standards Act (“FLSA”). In other words, does an individual qualify as an “intern” – such that they are not required to be paid per the FLSA – or is he or she actually functioning as an “employee” who must be paid accordingly? A recent development in this arena is discussed herein.

On January 5, 2018, the U.S. Department of Labor (“DOL”) announced in a press release that it was abandoning the six-part test it has used for years to determine whether interns are “employees” for purposes of the FLSA. The DOL declared that it was adopting the “primary beneficiary” test which has been favored by federal circuit courts.

This move by the DOL followed a December 19, 2017 ruling in the Ninth Circuit Court of Appeals expressly rejecting the DOL’s six-part test for determining whether interns and students are considered “employees” under the FLSA. In making this ruling, the Ninth Circuit joined a number of other federal circuit courts that have previously rejected the six-part test in favor of the so-called “primary beneficiary” test.

The DOL’s former six-part test rigidly required that an unpaid internship meet all of the six factors. One of the factors – that the employer derive “no immediate advantage from the activities of the intern” – was particularly problematic for federal circuit courts. The “primary beneficiary” test loosens these requirements and is a flexible, seven-factor test without a single determining factor. The DOL asks courts to examine, among other things, the “economic reality” of the intern-employer relationship to determine which party is the “primary beneficiary” of the relationship.

Download the full article, “Burr Alert: DOL Adopts the “Primary Beneficiary” Test for Internship Programs” written by Emily C. Killion.

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