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U.S. DOL Adopts “Primary Beneficiary” Test to Determine Whether Unpaid Interns Are Employees

In a move allowing increased flexibility for employers and greater opportunity for unpaid interns to gain valuable industry experience, the United States Department of Labor (“DOL”) recently issued Field Assistance Bulletin No. 2018-2, adopting the “primary beneficiary” test used by several federal appellate courts to determine whether unpaid interns at for-profit employers are employees for purposes of the Fair Labor Standards Act. If interns are, indeed, deemed employees, they must be paid minimum wage and overtime, and cannot serve as interns without pay. The “primary beneficiary” test adopted by the DOL examines the economic reality of the relationship between the unpaid intern and the employer to determine which party is the primary beneficiary of the relationship. Unlike the DOL’s previous test, the “primary beneficiary” test allows for greater flexibility because no single factor is determinative.

Along with its announcement of this change, the DOL also issued a new Fact Sheet which sets forth the following seven factors that make up the “primary beneficiary” test:

  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.
©2018 Epstein Becker & Green, P.C. All rights reserved.

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About this Author

Jeffrey M. Landes, Epstein Becker Green, Employment Litigator, New York Lawyer
Member

JEFFREY M. LANDES is a Member of the Firm in the Labor and Employment practice, in the firm's New York office.

Mr. Landes' experience includes:

  • Counseling clients in a variety of industries—including financial services, retail and communications—in all facets of employment law, including compliance with EEO laws and other statutes governing the workplace, independent contractor issues, executive terminations, restrictive covenants, drug testing, background checks, employee discipline and...

212-351-4601
Paul DeCamp, Epstein Becker Green, Labor & Employment Attorney
Member of Firm

Paul DeCamp is a Member of the Firm in the Employment, Labor & Workforce Management practice, in the Washington, DC, office of Epstein Becker Green. A former Administrator of the U.S. Department of Labor’s (DOL’s) Wage and Hour Division, Mr. DeCamp has more than two decades of experience representing employers and trade associations in the most complex and challenging wage and hour litigations, government investigations, and counseling matters.

Additionally, Mr. DeCamp has served as lead counsel in class and collective actions across the country. His work spans a broad range of industries, including aerospace, financial services, gaming, health care, hospitality, manufacturing, restaurants, retail, and transportation, as well as many others. 

His recent arguments in the federal appellate courts involved such cutting-edge issues as the status of NCAA Division 1 student-athletes under the FLSA, the validity of DOL’s tip-pooling regulations, and the deference owed to DOL’s subregulatory guidance regarding tipped employees engaged in side work.

202-861-1819
Associate

ANN KNUCKLES MAHONEY is an Associate in the Employment, Labor, and Workforce Management practice, in the New York office of Epstein Becker Green. Ms. Knuckles Mahoney:

  • Counsels employers on practices and procedures, such as employee handbooks and stand-alone policies

  • Advises employers on Fair Labor Standards Act (FLSA) wage and hour laws and the classification of workers

  • Assists in defending clients in labor and employment-related litigation in a...

212-351-5521