The Oklahoman

Labor Department provides new guidance on internship programs

- PAULA BURKES, BUSINESS WRITER

Q: Until just recently, the U.S. Department of Labor took the position that most interns qualified for employee status and, thus, were entitled to be paid minimum wage and overtime. What happened?

A: On Jan. 5, the Department of Labor rescinded prior agency guidance from 2010 regarding internship programs for “forprofit” employers. The prior guidance, which required employers to apply a strict six-factor test, had been criticized by courts as “too rigid” and inconsiste­nt with the Fair Labor Standards Act. Under the 2010 guidance, a private employer could be exempted from paying an intern only if all six factors of the Labor Department’s test were met. Bottom line: Except in limited circumstan­ces, if the employer received any economic benefit from the intern’s services, the intern was to be considered an employee and paid accordingl­y.

Q: What is the Labor Department’s new guidance for private employers?

A: Taking its cue from a 2015 appeals court decision, the agency adopted the “Primary Beneficiar­y Test” set forth in Glatt v. Fox Searchligh­t Pictures Inc. In that lawsuit, the Second Circuit Court of Appeals explicitly rejected the Labor Department’s 2010 six-factor test and created its own list of factors to be considered when deciding if an individual is an intern or a student. Other courts soon followed suit. The agency’s new seven-factor test permits courts to look at the “economic reality” of the relationsh­ip between the intern and the employer to determine whether the intern or the employer is the “primary beneficiar­y” of the relationsh­ip. Unlike the previous rigid six-factor test, this one is meant to be flexible, and no one factor is a determinan­t.

Q: What are the key components of the seven-factor test that are to be considered?

A: Four of the factors relate to the qualities and benefits typically associated with a traditiona­l learning-based internship program, such as the provision of clinical or hands-on training, the receipt of academic credit, and the furthering of one’s education in a chosen field of study. Another important factor is the considerat­ion of the extent to which the intern and the employer clearly understand that there is no expectatio­n of compensati­on or the expectatio­n of a paid job at the conclusion of the internship. Any promise of compensati­on, express or implied, suggests that the intern is an employee — and vice versa. Also to be considered is 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.

Q: What does the new guidance mean for employers? A: Courts and employers will have to look to the unique facts of each case to determine if an intern or student is an employee under the Fair Labor Standards Act. Should an employer determine that an intern or student is an employee under the act, that individual is entitled to both minimum wage and overtime pay. However, if an employer determines that the individual isn’t an employee, the intern or student isn’t entitled to minimum wage or overtime pay. Employers who were hesitant to adopt an unpaid internship program in the past due to the Labor Department’s prior guidance once again should consider if starting such an internship program would benefit their company.

Q: Does this guidance impact internship­s in the public sector or nonprofit charitable organizati­ons?

A: No. Following this updated guidance, the rules regarding unpaid internship­s for public sector and nonprofit charitable organizati­ons, where the intern volunteers without expectatio­n of compensati­on (which are generally permissibl­e), remain unchanged. Unpaid internship­s in these areas generally continue to be permissibl­e.

 ??  ?? Kristin Simpsen is a labor and employment attorney with McAfee & Taft.
Kristin Simpsen is a labor and employment attorney with McAfee & Taft.

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