In January, the U.S. Department of Labor (DoL) rolled out new guidelines that make it easier for companies to use unpaid interns, but some labor experts are warning the guidance is not a panacea. The update, published in a DoL guidance document on its website, sets a more flexible standard for employers than previous guidance. Now, interns must be the “primary beneficiaries” of the program—in other words, the programs must benefit the intern more than the company.
Per the guidance, unpaid internships must pass a “primary beneficiary test” based on seven criteria commonly recognized in court cases. The old test included six factors, one of which prohibited employers from deriving “immediate advantage from the activities of the intern.” Employers complained that this requirement made it nearly impossible to engage an intern in activities that were meaningful for both the intern and the employer.
Furthermore, unlike the previous standard, an unpaid internship isn’t required to meet any threshold regarding the seven factors. If asked to defend their programs in a court case or DoL action, employers are allowed to justify the internship on its own merits.
The Test for Unpaid Interns and Students
Courts have identified the following seven factors as part of the test:
- Expectation of Compensation. Is it clear that there is none? Any implied or stated compensation makes the intern an employee.
- Training: Does the internship provide training comparable to any other educational environment?
- Formal Education. Is the internship tied to the intern’s formal education, either through integrated coursework or academic credit?
- Schedule: Does the internship period correspond to the academic calendar?
- Applicability: Is the internship’s duration limited to a period of beneficial learning?
- Paid Work Product: Does the intern’s work complement, rather than replace, the work of paid employees?
- Promise of work: Is there no promise, understanding or entitlement to a paid job at the internship’s conclusion?
It remains to be seen whether the courts will construe this guidance narrowly or loosely, so companies that wish to hire unpaid interns should be prepared to defend their programs. If they are uncertain, the safest approach is always to pay the intern minimum wage.