David E. Schwartz and Risa M. Salins
On Jan. 5, 2018, the U.S. Department of Labor (DOL) announced it would replace its six-part test for determining when an intern is entitled to minimum wages and overtime pay as an employee under the Fair Labor Standards Act (FLSA), and adopt instead a flexible “primary beneficiary” test which has been applied by four federal courts of appeals. In short, the DOL’s new test allows courts to examine the economic realities of the intern-employer relationship to determine which party is the “primary beneficiary” of the relationship.
Old Test
The DOL promulgated its six-part test in 2010 in reliance upon the U.S. Supreme Court case Walling v. Portland Terminal Co., 330 U.S. 148 (1947), which found unpaid railroad brakemen trainees were not employees and were, instead, beyond the reach of the FLSA’s minimum wage protections. Under the six-part test, in order for a worker to be properly classified as an unpaid intern rather than an employee entitled to rights and protections under the FLSA, all of the following six conditions had to be met: (1) the internship, even though it included operation of the employer’s facilities, had to be similar to training which would be given in an educational environment; (2) the internship experience had to be for the benefit of the intern; (3) the intern could not displace regular employees, and had to work under close supervision of existing staff; (4) the employer that provided the training could derive no immediate advantage from the activities of the intern, and on occasion its operation might actually be impeded; (5) the intern was not necessarily entitled to a job at the conclusion of the internship; and (6) the employer and the intern understood that the intern was not entitled to wages for the time spent in the internship.
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