Recently, we’ve been warning employers that in order to have a legally compliant unpaid internship available, certain specific conditions had to be met. If those conditions were not met, employers ran the risk of facing liability for unpaid wages for someone they classified as an unpaid intern. The factors that have been in place until this month are as follows:
- The internship is similar to training that would be given in an educational environment.
- The internship is for the benefit of the intern.
- The intern does not replace regular employees, but works under close supervision of existing staff.
- The employer derives no immediate advantage from activities of the intern, and may even be impeded.
- The intern is not necessarily entitled to a job offer at the conclusion of work.
- The employer and intern understand that the intern is not entitled to wages.
An employer/intern relationship had to meet all of those factors to be a legal unpaid internship. Despite the previous DOL test, some federal courts considered instead who the “primary beneficiary” was to determine if an unpaid intern was actually an employee entitled to wages. The test considers the economic reality between the employer and intern.
Based on that test, the DOL has issued new factors to be used when determining if an intern can legally be an unpaid intern. Unlike the pre-2018 test, the employer/intern relationship does not have to meet all of these factors to be a legal unpaid internship, and no single factor is determinative. Rather, all of these factors will be considered and weighed based on the facts of any particular case. The new seven-factor test is as follows:
- The extent to which the intern and the employer clearly understand that there is no expectation of compensation. Any promise of compensation, express or implied, suggests that the intern is an employee—and vice versa.
- The extent to which the internship provides training that would be similar to that which would be given in an educational environment, including the clinical and other hands-on training provided by educational institutions.
- The extent to which the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit.
- The extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic calendar.
- The extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning.
- The extent to which the intern’s work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern.
- The extent to which the intern and the employer understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship.