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Need Summer Time Help? Beware of the Unpaid Intern

With spring and summer fast approaching, many students will be seeking internships to gain workforce experience. Likewise, many companies enjoy the opportunity to bring interns on board to handle a variety of tasks that serve to benefit the company. Despite the seemingly mutual benefit, employers need to pay close attention to the structure of any unpaid internships.

The United States Department of Labor (“DOL”) issued guidance in 2010 setting forth a six-factor test under the Fair Labor Standards Act (“FLSA”) to determine the employment status of interns at for-profit businesses. Under the test, interns are employees, unless all six factors are met.

In July 2015, the 2nd Circuit Court of Appeals rejected the DOL’s all-or-nothing approach in favor of a more flexible “primary beneficiary test.” The 2nd Circuit weighs the internship’s benefits to the intern against the benefits to the employer. In September 2015, the 11th Circuit Court of Appeals also rejected the DOL test as “too rigid.” The 11th Circuit adopted the 2nd Circuit’s more flexible approach that, in contrast to the DOL guidance, considers a non-exhaustive list of key factors to determine the primary beneficiary of the relationship. Examples of key factors the court considers important include:

  1. The intern and employer clearly understand that there is no expectation of compensation. Any promise of compensation, express or implied, suggests that the intern is actually an employee.
  2. The internship provides training similar to that given in an education environment, including the clinical and other hands-on training provided by such institutions.
  3. The internship is tied to the intern’s formal education program by integrated coursework or receipt of academic credit.
  4. The internship accommodates the intern’s academic commitments by corresponding to the academic calendar.
  5. The internship’s duration is limited to the period in which it provides the intern with beneficial learning.
  6. The intern’s work complements, rather than displaces, the work of paid employees while providing significant education benefits to the intern.
  7. The intern and the employer understand that the internship is conducted without entitlement to a paid job at the end of the internship.

Given the attention of DOL and the courts to this issue, employers offering unpaid internships for the spring and summer months should establish clear guidelines for the company-intern relationship. If employers are not careful, they may unwittingly create an employment relationship with the intern. If you have questions about whether your use of unpaid internships complies with the law, please contact members of our Employment Law Group.

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