The practice of hiring interns has become widely recognized across different organizations. Determining whether an intern is considered an “employee” under the Fair Labor Standards Act (FLSA) has been a troubling task for most organizations until now. The Department of Labor has recently updated Fact Sheet #71: Internship Programs under the Fair Labor Act, and have adopted a “primary beneficiary test” that has been used by the courts to determine whether an intern (or student) is an employee under FLSA.
The updates stem from recent court cases in which former interns are taking legal action against the organizations they interned with, claiming the employer owes them wages for work completed during their internship. The “primary beneficiary” test was first set forth by Glatt vs. Fox Searchlight Pictures, Inc. In this case, the Plaintiffs claimed that Fox Searchlight Pictures, Inc. violated the FLSA and the New York Labor Law when the company failed to compensate them during their internship as required by the minimum wage and overtime provisions. The court outlined the following seven factors in determining whether an intern/trainee is an “employee” (and were subsequently adopted by two other circuits). These non-exhaustive factors are as follows1:
1. The extent to which the intern and the employer clearly understand there is no expectation of compensation. Any promise of compensation, express or implied, suggest 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 education 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 signification education benefits to the intern.
7. The extent to which the intern and the employer understand the internship is conducted without the entitlement to a paid job at the conclusion of the internship.
Lisa Milam-Perez, who is a senior law employment analyst at Wolters Kluwer, identified a few pointers that employers should consider following if they regularly hire interns. The common notion behind her pointers was for employers to ensure their internal practices regarding internship programs are detailed and clearly defined. She also recommended working closely with the Universities and Colleges from where the interns are being placed, ensuring the work that is being done in the organization reflects the educational goals the student is pursing at their school.
Educating staff and decision makers on the updated standards in employing interns should be a priority for organizations that incorporate this hiring practice. The more familiar the organization is with these changes, the more time and money can be saved from possible future litigations.