“I’m Just an Intern!” DOL Changes Course and Adopts Primary Beneficiary Standard for Intern Compensation Cases

Determining when an unpaid intern is really an employee has been a moving target for the last several years. However, on January 5, 2018, the Department of Labor announced that its Wage and Hour Division will now use the “primary beneficiary” test to determine employee status.

What is the primary beneficiary test? This is the standard numerous appellate courts have adopted over the last several years. The DOL’s announcement is a change in policy from the agency’s six-factor test adopted in 2010, which was widely challenged and several times rejected by courts. Most recently, the Ninth Circuit adopted the “primary beneficiary” test instead of the DOL’s position.

This issue has been percolating for several years (we have written about it here and here). Now that the DOL is getting in line with the seven-factor primary beneficiary test, it is worth a refresher on what factors to consider in whether an intern can be unpaid:

1. Do the intern and employer clearly understand that there is no expectation of compensation for the job?
2. Does the internship provide training that would be similar to that given in an educational environment?
3. Is the internship tied to a formal education program with coursework and/or academic credit?
4. Does the internship fit into the intern’s academic calendar?
5. Is the length of the internship limited to a period where they are provided with beneficial learning?
6. Does the intern’s work assist or complement the work of paid employees instead of displacing them?
7. Does the intern understand that the intern is not automatically entitled to a paid job at the conclusion of the internship?

This change does not make it open season to set up unlimited unpaid internships. Those free interns can still sue you and maybe win, depending on the facts of the case. If you want to use unpaid interns, the best bet is still to set it up through the intern’s school and see about academic credit. If that is not a viable option, the safest course is still to pay interns at least minimum wage and overtime as appropriate.