Facebook, Twitter, LinkedIn, YouTube, RSS, EmailFacebookTwitterLinkedInYoutubeRSS News FeedEmail

News

Intern or Employee? Department of Labor Adopts More Flexible Economic Realities Test

by Martin Salcedo, Esq. - The Human Equation on 4/9/2018
Facebook, Twitter, LinkedIn, Google+, YouTube, RSS Facebook Twitter Linkedin Google+ YouTube RSS
interns-FLSA
Untitled Document

When is an intern considered an employee under the Fair Labor Standards Act? In case you haven’t heard, the answer to this question recently changed. In January 2018, the Department of Labor clarified that going forward, a “primary beneficiary” test will be used to determine whether interns are employees under the FLSA.

If you don’t think this is significant, think again. The FLSA’s minimum wage and overtime pay requirements apply to employees, not interns. “For profit” employers are not required by the FLSA to compensate interns for their work. Not surprisingly, some employers have tried to exploit unpaid interns by accepting free labor without providing an appreciable benefit in education or experience.

The DOL has relied on informal guidance to prevent this kind of abuse since the late 1960s. In 2010, the DOL published a strict six-factor test to determine whether an intern is, in fact, an employee under the FLSA. To pass this test, all six factors had to apply.

In January 2018, the DOL replaced the six-factor test with a “primary beneficiary” test to eliminate unnecessary confusion and provide increased flexibility to holistically analyze internships on a case-by-case basis. This test includes seven factors that should be considered to help distinguish interns from employees under the FLSA.

  1. Expectation of Compensation. 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. Training. 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. Education. 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. Academics. The extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic calendar.
  5. Duration. The extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning.
  6. Displacement. 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. Promise of Employment. 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.

According to the DOL, this test allows courts to examine the economic reality of the intern-employer relationship to determine which party is the primary beneficiary of the relationship. Unlike the rigid six-factor test, the primary beneficiary test is intended to be flexible. No single factor is determinative and additional factors may be considered on a case-by-case basis when appropriate.

The FLSA’s “internship exclusion” was quite narrow under the six-factor test. Whether this changes under the primary beneficiary test remains to be seen. Nevertheless, employers should proceed cautiously when deciding whether that new worker really qualifies as an unpaid intern under the FLSA.

Our online FLSA course lets you earn HRCI and SHRM recertification credits as you learn more about wage and hour regulations. You can also contact us to learn more about controlling employment-related liabilities.

To receive regular updates about developments which may affect your business, subscribe to The Human Equation's news briefs. The Human Equation prepares all risk management and insurance content with the professional guidance of Setnor Byer Insurance and Risk.

Tags: , , , ,
Categories: Florida Condominium Management, Human Resources

Add comment

biuquote
  • Comment
  • Preview
Loading



  privacy policy
The Human Equation's newsletters and publications are intended as an information source for the clients and friends of the firm. Their content should not be construed as legal advice, and readers should not act upon the information in these publications without professional guidance. Please note that newsletters and publications that are archived by The Human Equation are not updated after initial publication and may not contain the most current information available.

Refer to friendRefer to friend

Permission to ReprintPermission to Reprint

Contact a Subject Matter ExpertContact an Expert

Subscribe to Our NewsletterSubscribe to Our Newsletter

Tags

© 2018 - The Human Equation, Inc. All rights reserved. - Privacy Policy - Disclaimer -
Follow us on Facebook.comFollow us on Twitter.comFollow us on Linkedin.comFollow us on YouTube.comSubscribe to our RSS FeedSend us an email
Subscribe to our newsletter
900 South Pine Island Road, Suite 300 - Plantation, FL 33324 - Phone: 800-521-9667 / 954-382-0030 - Fax: 954-382-2810