The US Dept of Labor (USDOL) recently scrapped the 2010-era six-factor rigid test, in favor of a seven-factor flexible test that two influential courts of appeal promulgated.
Don’t be fooled though — if you’re not paying interns who are doing work that you’d otherwise be paying a real employee (or real vendor or subcontractor) to perform? You’re dancing in front of the Fair Labor Standards Act (FLSA) train. Don’t act surprised if the federal and state wages and hours regulators run you over.
So seven factors now instead of six, “how is that more flexible?” you might be asking. Not all seven factors need to be present, and no one factor is pivotal. Think of these like a two-column scorecard. As you answer each question, does the benefit flow more so to you, the employer, or to the intern? If the “totality of the circumstances” reveal that the “primary beneficiary” is you? You’d better be paying that intern. And, conversely, if the intern is reaping the greater benefit, then it’s permissible to call it an unpaid internship.
- Do both parties understand that the intern is not entitled to compensation?
- Does the internship provides training that would be given in an educational environment.?
- Is the intern able to get academic credit for this internship?
- Has the internship been structured to correspond with the academic calendar?
- Is the internship duration tied to the duration of its educational component?
- Is the intern doing work that complements the normal workaday, rather than doing work that would have otherwise been done by paid employees, and is this complementary work providing significant educational benefits?
- Do both you and the intern understand that the internship is not a proxy for a recruiting probationary period prior to regular employment?
This rating system recognized that there is indeed value that doesn’t always have to be reflected in paid dollars.