For-profit employers occasionally bring on unpaid interns to work at the company. The question employers must ask is whether an unpaid intern is actually an employee and, therefore, entitled to be paid minimum wage and overtime pay under the federal Fair Labor Standards Act (FLSA). If an intern is not an employee under the FLSA, no compensation is required.
The U.S. Department of Labor (DOL) has clarified the factors it will consider in determining whether an intern working for a for-profit employer is in fact an employee under the FLSA. Following the lead of several courts, the DOL recently advised that it will scrap the agency’s previous six-factor test for unpaid interns and instead will utilize the “primary beneficiary” test used by courts to determine whether interns are employees under the FLSA. Under this test, courts examine the “economic reality” of the intern-employer relationship to determine which party is the “primary beneficiary” of the relationship.
The “primary beneficiary” test considers the following non-exhaustive seven (7) factors:
The DOL emphasizes that none of the above factors is dispositive. Whether an intern is an employee under the FLSA is determined on a case-by-case basis based on the unique circumstances of each case. The DOL and the courts may also consider other relevant evidence, beyond the above factors, in making a determination of employee status. Also, remember that applicable state or local laws may provide interns with broader protections than under federal law. For-profit employers should consider the above factors and should consult with employment counsel before deciding not to pay an intern.