Hiring interns? Read this first

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U.S. Department of Labor seal
U.S. Department of Labor seal

The Labor Department has clarified when interns working at for-profit employers are actually employees who are entitled to minimum wages and overtime pay under the Fair Labor Standards Act.

The move comes after a Dec. 19 ruling by the 9th U.S. Circuit Court of Appeals, the department said Jan. 5. The federal appellate court was the fourth to reject the department's six-part test for determining whether interns and students are employees under the FLSA.

The Labor Department said now it will conform to the appellate court rulings by using the same “primary beneficiary” test that these courts use.

That test has seven considerations, according to a fact sheet posted on the Wage and Hour Division section of the department's website:

  1. 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. 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. 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 significant educational benefits to the intern.
  7. 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.

“Courts have described the ‘primary beneficiary test' as a flexible test, and no single factor is determinative,” the department said. “Accordingly, whether an intern or student is an employee under the FLSA necessarily depends on the unique circumstances of each case.”

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