Government Changes Definition of Interns
The United States Department of Labor has announced changes to the way it defines interns, a shift that will affect thousands of employers in Massachusetts.
In 2010, the U.S. Department of Labor (DOL) announced a six-part test under the Fair Labor Standards Act (FLSA) to assist employers in determining whether or not an “intern” at a for-profit employer was actually an intern.
The former six factors were:
The internship, even though it includes an actual operation of the facilities of the employer, is similar to training that would be given in an educational environment.
The internship experience is for the benefit of the intern.
The intern does not displace regular employees but works under close supervision of existing staff.
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.
The intern is not necessarily entitled to a job at the conclusion of the internship.
The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.
But federal appeals courts ruled against the DOL’s six-factor test and instead opted for a “primary beneficiary” standard where the key issue is whether the intern or the employer is the primary beneficiary of the relationship. The “primary beneficiary test” is a flexible test and no single factor is determinative - whether an intern or student is an employee under the FLSA necessarily depends on the unique circumstances of each case.
The DOL’s Wage and Hour Division now says it will update its enforcement policies to align with the recent court decisions, a move the agency says will eliminate unnecessary confusion and provide DOL investigators with increased flexibility to holistically analyze internships on a case-by-case basis.
DOL issued an updated fact sheet, #71, https://www.dol.gov/whd/regs/compliance/whdfs71.htm on internship programs under the FLSA. The “primary beneficiary” Fact Sheet lists seven factors for determining whether an intern is an employee and thus should be paid:
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.
The extent to which the internship provides training that would be similar to that given in an educational environment, including the clinical and other hands-on training provided by educational institutions.
The extent to which the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit.
The extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic calendar.
The extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning.
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.
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.
If analysis of these circumstances reveals that an intern or student is an employee, then he or she is entitled to both minimum wage and overtime pay. On the other hand, if the analysis confirms that the intern or student is not an employee, then he or she is not entitled to any wages.
Interestingly, Massachusetts has for many years held that: “For the purposes of determining whether volunteers must be paid minimum wage under the Massachusetts Minimum Wage Law, the Massachusetts Department of Labor Services (DLS) uses the same factors as the U.S. Department of Labor in determining whether workers are volunteers under the Fair Labor Standards Act.
Adoption of the new standard by DOL presumably throws that policy into question, and we will have to see how or if the state takes action to address it.
The FLSA treats interns at non-profits differently. For example, the FLSA exempts certain people who volunteer to perform services for a state or local government agency or who volunteer for humanitarian purposes for non-profit food banks. It also recognizes an exception for individuals who volunteer their time, freely and without anticipation of compensation, for religious, charitable, civic, or humanitarian purposes to non-profit organizations.
Unpaid internships for public sector and non-profit charitable organizations, where the intern volunteers without expectation of compensation, are generally permissible.
The DOL changes its opinion letter practice
DOL has also resumed a policy, discontinued during the Obama Administration, of responding with an opinion letter to individual questions from employers seeking clarification of a DOL interpretation of a law or regulation under its purview.
These letters were limited in their application to situations with similar facts to the question that was posed and carried little broader precedential impact.
Early in the Obama administration, DOL began instead to issue Administrator’s Interpretations on broader policy issues. For example, interpretations were issued on joint employers and independent contractors. Both Interpretations were withdrawn early in the Trump Administration by the new Secretary of Labor.
DOL announced that it will now return to the opinion-letter policy. In making the announcement, it released 17 letters that had been originally issued in 2009 and then withdrawn shortly after the Obama Administration arrived.
The shift away from Administrator’s Interpretations back to opinion letters will change the way the DOL communicates with the employer community. Employers concerned about the DOL’s views on a particular topic will need to pay close attention to the new letters as they issue to see if there is relevant information in an opinion letter that may apply to their company practices.
Finally, DOL is also evaluating other aspects of how to interpret the FLSA, a law that covers everything from child labor to record-keeping so stay tuned for future changes.