As a general rule, the federal Fair Labor Standards Act (FLSA) requires all for-profit employers to pay minimum wage and overtime compensation to their employees. Many employers get around these requirements by classifying some of their workforce as unpaid interns. Such individuals frequently work for no pay in exchange for college credit or other intangible benefits.
Whether or not unpaid interns should be legally classified as “employees” entitled to a paycheck has been a subject of much legal debate in recent years. Last November, we discussed the views of the New York-based U.S. Second Circuit Court of Appeals on the subject. The Second Circuit said there were seven factors that judges should weigh in separating “interns” from “employees” covered by the FLSA.
In establishing its seven factors, the Second Circuit largely rejected standards previously adopted by the U.S. Department of Labor during the Obama administration, which the Court found too rigid. However, the Trump administration has now moved to adopt its own rules, which largely mirror the Second Circuit's standards. The Department of Labor's Wage and Hour Division recently issued a revised fact sheet that outlines the administration's current approach to classifying internships.
Seven Factors to Determine the “Primary Beneficiary”
The Labor Department essentially restates the Second Circuit's seven factors, which are all designed to examine whether the employer or the intern/employee is the “primary beneficiary” of the relationship. These factors are as follows:
- To what extent do the parties “clearly understand there is no expectation of compensation”? If there is any promise or suggestion of compensation, the intern may actually be an employee.
- To what extent does the purported internship “training” that mirrors that available in an “educational environment”?
- To what extent is the purported internship “tied to the intern's formal education program”? Does the intern actually receive formal college credit, and is their coursework “integrated” into their duties with the employer?
- To what extent does the employer's scheduling accommodate the intern's “academic commitments”?
- Is the purported internship “limited to the period” that provides the intern “with beneficial training”?
- To what extent is the purported intern's work complementing–rather than displacing–that of any paid employees. To what extended does the work itself provide “significant educational benefits to the intern”?
- Is there a clear understanding between the employer and the purported intern that there is no “entitlement to a paid job at the conclusion of the internship”?
The Labor Department reiterates what the Second Circuit and other courts have said; these seven factors must be assessed within the context of each individual case. No one factor creates a bright-line rule for separating interns from employees. But if, after assessing all relevant factors, a court finds the primary beneficiary of the purported internship relationship is the employer, the intern may be entitled to compensation as an employee.
Speak With a New York City Employee Rights Attorney
If you have any questions or concerns about whether you have been improperly classified as an intern, or you are simply an acknowledged employee who is not being paid the required minimum wage and overtime rates to which you are entitled, contact the New York employment law attorneys at White, Nisar & Hilferty, LLP. today.