In a Field Assistance Bulletin issued earlier this month, the Department of Labor has announced its intention to apply a “primary beneficiary” test to determine whether interns and students at for-profit organizations should be classified as employees under the Fair Labor Standards Act (FLSA). 

The “primary beneficiary” test, which has been adopted by four federal appellate courts including the United States Court of Appeals for the Ninth Circuit, analyses whether an intern or student is an employee by considering the economic reality of the relationship to determine whether the employer or intern is the primary beneficiary of the relationship.  Factors that the agency will consider in applying the “primary beneficiary” test include:

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.

While the DOL plans to update its enforcement policies to align with recent case law and the factors listed above, the agency also explained that it would not apply the factors as a rigid test.  Instead, the DOL will work to increase investigators’ flexibility to “holistically analyze internships on a case-by-case basis.”