HR Tip: Less stringent test for intern pay adopted by DOL

On Jan. 5, the Department of Labor (DOL) introduced a less stringent test to determine whether employers must pay their interns at least a minimum wage and overtime. The new approach involves a primary-beneficiary test and abandons a rigid test where six parts all had to be met for someone to be considered an unpaid intern and not an employee. Four appellate courts rejected the DOL’s six-part test and the newly adopted seven factor primary-beneficiary test was used by these courts.

The new test does not require each of its factors to be met and the seven factors to be considered are the extent to which:

  • Both parties understand that the intern is not entitled to compensation
  • The internship provides training that would be given in an educational environment
  • The intern’s completion of the program entitles him or her to academic credit
  • The internship corresponds with the academic calendar
  • The internship’s duration is limited to the period when the internship educates the intern
  • The intern’s work complements rather than displaces the work of paid employees while providing significant educational benefits
  • The intern and the employer understand that the internship is conducted without entitlement to a paid job at the internship’s end

The new standard is more flexible and aligned with court rulings. It’s expected to be easier to defend unpaid internships if they’re set up properly and there’s a good agreement between the intern volunteers and the employer. However, it is not a license to use unpaid interns without restraint. The test still exists and the question of who’s the primary beneficiary of the program – the employer or the intern – ultimately needs to be answered.

Companies that use internships should revise all program-related documentation-such as policies, advertisements and recruiting materials-to use the language of the seven factors in the primary-beneficiary test and the student intern and the employer should sign agreements incorporating the language.

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