Throughout the United States, the practice of hiring interns for paid and unpaid positions is very popular, providing practical benefits to employers and students alike. However, under the Fair Labor Standards Act (FLSA), all “for-profit” employers are required to pay employees for their work. As a result, the Department of Labor has created a set of guidelines to allow businesses to hire unpaid interns without violating the FLSA. Therefore, a business seeking to recruit unpaid interns must first ensure that they meet the factors set out by the Department of Labor.
What is the Primary Beneficiary Test?
In 2018, the Department of Labor introduced the Primary Beneficiary Test to determine whether the use of unpaid interns is legal under federal employment law. The test has seven factors which, although broad and subjective, must be met by any business seeking to recruit unpaid interns.
The first factor under the primary beneficiary test requires both the intern and employer to clearly understand that there is no expectation of compensation. Any promise of compensation, whether express or implied, would suggest that the intern is an employee.
Second, the training received by the intern over the course of the internship must be equivalent to what the intern would receive in an educational environment. Therefore, the tasks assigned to the intern must mirror the education they are receiving at their college, university, or other accredited program.
Third, the internship must be tied to the intern’s formal education program. This may be achieved through integrated coursework, which combines what a student would learn in a traditional classroom setting with practical and hands-on experiences, or through the receipt of academic credit. The latter option is particularly popular amongst college students, with various degree programs offering course-equivalent credits for work performed during an internship.
Fourth, the internship must accommodate the intern’s academic commitments. As a result, most internships aimed at college students are structured alongside the academic calendar. Interns normally work for the duration of one or more college semesters, which on average last for sixteen weeks.
Fifth, the internship’s duration must be limited to the period in which the internship provides the intern with beneficial learning. Given the relationship between internships and academic programs, the Department of Labor has sought to ensure that interns are not retained as unpaid workers by businesses for an indefinite period. Instead, once the intern is no longer receiving any practical benefit from exposure to a specific work environment, the internship must come to an end.
Sixth, the work performed by an intern must complement, rather than displace, the work of paid employees, while still providing significant educational benefits to the intern. Under this requirement, the Department of Labor is seeking to ensure that employers do not exploit the availability of unpaid interns to serve as replacements for their paid staff members. Since they are not employees, interns may not be designated to perform tasks ordinarily performed by paid workers, but must instead perform duties that assist and complement the paid employees.
Lastly, both the intern and employer must understand that the internship is conducted without the right to a paid position once the internship has concluded. To avoid such a dilemma, unpaid internship contracts routinely include a clause informing both parties that the position is for a set period of time, and that there are no future promises or obligations resulting from the internship.
Is a contract required for an unpaid internship?
While there is no requirement to have an internship agreement, they are strongly encouraged in order to protect the rights of employers and interns. Every internship agreement should explicitly list the seven factors under the Primary Beneficiary Test, and explain how the intern’s duties and responsibilities correlate with the requirements. Failure to include any factor may result in future complications, such as a former intern arguing that the work they performed was that of a paid employee, or that they were promised employment following the internship, both of which would have classified the intern as an employee, and therefore entitled them to proper monetary compensation.