DOL to Use More Employer-Friendly "Primary Beneficiary" Test for Unpaid Internships

Author: Michael Cardman, XpertHR Legal Editor

January 8, 2018

The US Department of Labor (DOL) has rescinded its longstanding "six-factor test" for determining whether an intern qualifies as an employee under the Fair Labor Standards Act (FLSA) in favor of the more employer-friendly "primary beneficiary test."

In a new Field Assistance Bulletin, the DOL said it was adopting the primary beneficiary test to "align with recent case law, eliminate unnecessary confusion among the regulated community, and provide [its] investigators with increased flexibility to holistically analyze internships on a case-by-case basis."

Under the old six-factor test - which was incorporated into the DOL's enforcement policies dating back to at least 1975 and was later memorialized in a fact sheet issued by the Obama administration in 2010 - the DOL considered all interns to be employees entitled to the minimum wage and overtime under the FLSA unless all of its six strict criteria were met.

However, several federal appeals courts rejected the six-factor test in favor of a primary beneficiary test that considers the extent to which:

  1. The intern and the employer clearly understand that there is no expectation of compensation;
  2. 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 internship is tied to the intern's formal education program by integrated coursework or the receipt of academic credit;
  4. The internship accommodates the intern's academic commitments by corresponding to the academic calendar;
  5. The internship's duration is limited to the period in which the internship provides the intern with beneficial learning;
  6. The intern's work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern; and
  7. The intern and the employer understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship.

Although these considerations are similar to the old six-factor test, under the primary beneficiary test, no single factor is the final word. As a result, every factor need not point in the same direction for a court to conclude that an intern is not an employee. In addition, under the primary beneficiary test, the factors are non-exhaustive. Thus, courts may consider relevant evidence beyond the specified factors in appropriate cases.