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March 1st, 2018
employment
DEPARTMENT OF LABOR ALIGNS ITSELF WITH ELVENTH CIRCUIT BY ANNOUNCING THE PRIMARY BENEFICIARY TEST AS THE DEFINITIVE TEST FOR ASSESSING WHETHER INTERNS QUALIFY AS EMPLOYEES UNDER THE FEDERAL LABOR STANDARDS ACT

The U.S. Department of Labor (“DOL”) announced that the “primary beneficiary” test is the definitive test for analyzing intern-employer relationships under the Federal Labor Standards Act (“FLSA”).  That test has been promulgated by several Circuit Courts, including the Second, Sixth, Ninth and Eleventh Circuit Courts of Appeal. See Benjamin v. B & H Educ., Inc., 877 F.3d 1139 (9th Cir. 2017); Glatt v. Fox Searchlight Pictures, Inc., 811 F.3d 528, (2d Cir. 2016); Schumann v. Collier Anesthesia, P.A., 803 F.3d 1199 (11th Cir. 2015); Solis v. Laurelbrook Sanitarium & Sch., Inc., 642 F.3d 518,529 (6th Cir. 2011).

In 2010, under the Obama administration, the DOL issued a six-factor test for determining whether an intern was an employee for the purposes of the FLSA in an attempt to crack down on employers designating individuals as interns to avoid wage and hour laws. However, since that test was announced, appellate courts across the country have rejected it in favor of the “primary beneficiary” test.  See e.g., Benjamin, 877 F.3d at 1146 (9th Cir. 2017); Schumann, 803 F.3d at 1211-12 (11th Cir. 2015). As a result, on January 5, 2018, the DOL announced that “going forward, the [agency] will conform to these appellate court rulings by using the same ‘primary beneficiary’ test.” The DOL’s reasoning was based on the flexibility of the primary beneficiary test where “no single factor is determinative” and which allows for courts to assess the “unique circumstances of each case.”           

The primary beneficiary test is identical to what the Eleventh Circuit adopted in Schumann. See id. It is a seven-factor test that evaluates the extent to which 1) the intern and employer understand there is no expectation of compensation; 2) the internship provides training that would be similar to that which would be given in an educational environment; 3) the internship is tied to the intern’s formal education program; 4) the internship accommodates the intern’s academic commitment; 5) the internship’s duration is limited to the period; 6) the intern’s work complements, rather than displaces, the work of paid employees while providing significant educational benefits; and, 7) the intern and the employer understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship.

Employers should take heed of these seven factors when designating any position as an internship.

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