Primary Beneficiary Test Now Used to Determine Whether Interns are Employees

According to the Atlanta Business Chronicle, the United States Department of Labor issued new guidelines in January of 2018 designed to provide guidance in determining whether students and interns working jobs at for-profit employers are employees entitled to minimum wage and overtime protections granted by the Fair Labor and Standards Act.

The Fair Labor and Standards Act requires all for-profit employers to pay employees for their work. Students and interns are sometimes not considered employees under the law because they are receiving an education and vocational training from their relationship with a for-profit employer. There are circumstances, however, in which students and interns are considered employees and are therefore entitled to minimum wage and overtime pay for their work. The new guidelines issued by the Department of Labor are identical to the seven factors that are identified in Glatt v. Fox Searchlight Pictures, Inc., 811 F. 3d 528 (2d Cir. 2015), in which the Court addressed whether unpaid interns should have been classified as employees under the FLSA.

In the Glatt case, the Court articulated that the proper question to ask in determining whether an intern should be considered an employee is to look at whether the intern or the employer is the primary beneficiary of the relationship because it focuses on what the intern receives in exchange for his or her work, it allows the courts flexibility to examine economic realities between the intern and the employer, and it acknowledges that the intern-employer relationship is different from a standard employee-employer relationship because the intern receives educational and vocational training from the relationship.

The Court then sets out a non-exhaustive list of considerations to consider in determining who the primary beneficiary of the relationship is, and whether an intern is an employee entitled to minimum wage and overtime protections. Those considerations are the following:

• 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.

(Glatt, at 536-37).

The above-listed factors are used to determine who the primary beneficiary of the relationship is and no single factor is determinative. The primary beneficiary test is meant to be flexible and adapt to the unique circumstances of each individual case.

If you are an unpaid intern, but feel like your employer is unfairly benefiting from your relationship in the Fort Worth, Texas area, contact one of our experienced employment attorneys to discuss your specific situation.