To Pay, Or Not To Pay. Your Interns.
The Department of Labor (DOL) has announced a change in the test it uses to determine whether interns should be paid. Previously, six factors had to be present for the intern to be unpaid. Now, the DOL will not require that all six criteria be met, will use the “primary beneficiary” test, and will “holistically” analyze internships on a case-by-case basis.
The Old Test
The prior test required that each of the below factors be met in order for an individual to be considered an intern and not entitled to compensation.
- The training, even though it includes actual operations of the facilities of the employers, is similar to that which would be given in a vocational school.
- The training is for the benefit of the student.
- The student does not displace a regular employee, but works under the close observation of a regular employee or supervisor.
- The employer provides the training and derives no immediate advantage from the activities of the student; and on occasion, the operations may actually be impeded by the training.
- The student is not necessarily entitled to a job at the conclusion of the training period.
- The employer and the student understand that the student is not entitled to wages for the time spent training.
The New Test
The “primary beneficiary” test lets courts look at the “economic reality” of the intern-employer relationship. This test centers around whether the primary beneficiary of the relationship is the intern, or the employer. It considers the below seven non-exhaustive factors, which are meant to be flexible, with no single dispositive factor.
- 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 interns’ 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 entitlements to a paid job at the conclusion of the internship.
But New York…
The New York State Department of Labor still follows an 11-factor test that requires all of the below 11 factors to be met, or the intern is an employee and must be paid at least minimum wage.
- The training, even though it includes actual operations of the facilities of the employers, is similar to that which would be given in a vocational school.
- The training is for the benefit of the student.
- The student does not displace a regular employee, but works under the close observation of a regular employee or supervisor.
- The employer provides the training and derives no immediate advantage from the activities of the student; and on occasion, the operations may actually be impeded by the training.
- The student is not necessarily entitled to a job at the conclusion of the training period.
- The employer and the student understand that the student is not entitled to wages for the time spent training. +N Trainees/students/interns have been notified in writing that they will not receive any wages for such training and are not considered to be employees for minimum wage purposes.
- Any clinical training is performed under the supervision and direction of individuals knowledgeable and experienced in the activities being performed.
- The trainees or students do not receive employee benefits.
- The training is general, so as to qualify the trainees or students to work in any similar business, rather than designed specifically for a job with the employer offering the program.
- The screening process for the internship program is not the same as for employment, and does not appear to be for that purposes, but involves only criteria relevant for admission to an independent educational program.
- Advertisements for the program are couched clearly in terms of education or training, rather than employment, although employers may indicate that qualified graduates may be considered for employment.
The Bottom Line
The factors in each test look fairly similar, but the extent to which the DOL will now evaluate whether interns must be paid on a highly flexible, case-by-case basis means employers should exercise extra care. Please contact us at 585.546.2500 for assistance ensuring your compliance with the new approach.
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About MCCM
McConville Considine Cooman & Morin, P.C. is a full-service law firm based in Rochester, New York, providing high-quality legal services to businesses and individuals since 1979. With over a dozen attorneys and a full paralegal support staff, the firm is well-positioned to right-size services tailored to each client. We are large enough to provide expertise in a broad range of practice areas, yet small enough to devote prompt, personal attention to our clients.
We represent a diverse range of clients located throughout New York State and New England. They include individuals, numerous manufacturing and service industry businesses, local governments, and health care professionals, provider groups, facilities and associations. We also serve as local counsel to out-of-state clients and their attorneys who have litigation pending in Western New York courts. For more information, please contact us at 585.546.2500.