By: Mark McAndrew

As summer approaches, recent changes to the tests as to whether Fair Labor Standards Act (wages/overtime) applies to interns are worth revisiting. The Department of Labor examines the “economic reality” of the relationship and who derives the primary benefit from that relationship to determine whether the intern should be paid as an employee.

There are seven primary factors. They are: (1) the extent to which the intern and employer clearly understand there is no expectation of compensation; (2) the extent to which the internship provides training similar to what would be provided in an educational environment; (3) the extent to which the internship is tied to the intern’s formal education program such as through integrated coursework; (4) the extent to which the internship accommodates the intern’s academic commitments; (5) the extent to which the internship’s duration is limited to the period in which it provides the intern with beneficial learning; (6) the extent to which the intern’s work complements (but does not displace) the work of paid employees and provides significant educational benefits to the intern; and (7) the extent to which the intern and employer understand that the internship is conducted without an entitlement to employment at its conclusion.

The DOL’s test applies to interns who work in a “for-profit” environment. In contrast, Fact Sheet #71 contains specifics related to unpaid internships for public and non-profit organizations, where internships based on “volunteers without expectation of compensation,” are generally permissible. The FLSA contains exemptions for “volunteers” who meet certain requirements.

While the test provides flexibility with respect to the use of unpaid interns, employers are wise to carefully examine the issue and seek the advice of counsel with respect to their use of unpaid internships.

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