Interns are valuable members of your staff as they learn and absorb the knowledge and experience your company offers while they gain real-world experience. Now, the Department of Labor made it easier to hire interns without having to pay them.
In a bulletin released by the DOL’s Wage and Hour Division, the agency announced that it is doing away with its much-criticized six-factor test for determining whether an intern qualifies as an employee who is entitled to earn at least minimum wage, as well as potential overtime payments under the Fair Labor Standards Act (FLSA). Per the terms of the previous guidance, interns had to meet each of the very strict six criteria in order to be considered a true intern and thus be able to work at no cost to employers. However, meeting each of the factors was nearly impossible, meaning that most companies ended up paying their interns.
However, moving forward, the DOL is adopting a primary beneficiary test. This “friendlier” approach is designed 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.” Essentially, the new rules ask employers to consider whether the individual in question would be the primary beneficiary of the internship; if they are not, then the internship must be paid.
In order to determine this status, the DOL fact sheet notes that courts consider the following factors when rendering their decision on the status of the internship:
- 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.
- 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.
- The extent to which the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit.
- The extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic calendar.
- The extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning.
- 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.
- 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.
Now, it should be noted that in order to qualify for an unpaid internship, interns no longer have to meet each of the criteria listed above; instead, the factors are intended to be considered as a collective to help best define the intern/employer relationship and render a payment decision accordingly.
Abel HR can help you set up an intern program at your company while meeting all the new requirements. Ask us how at email@example.com or 800-400-1968.