The days are getting longer, the temperatures are rising, and kids everywhere are counting down the days until summer vacation begins. For many employers, the change in the season brings another big shift: the arrival of summer interns.

Internship programs are great for employers and interns alike – interns gain experience, training, and exposure to the employer’s industry, and employers gain extra help, new ideas, and, hopefully, the chance to establish a pipeline of possible future employees. But the question of whether employers could lawfully offer unpaid internships has been a bit of a moving target. Since we last covered this topic in 2012, however, the rules governing unpaid internships have changed. This year, the Department of Labor (“DOL”) rejected the six-factor test that it had previously used to determine whether an intern should be considered an employee under at least the minimum wage provisions of the Fair Labor Standards Act (meaning that they could not work without pay). Instead, the DOL adopted a new, seven factor-test known as the “primary beneficiary test.”

In good news for employers, the new primary beneficiary test is considered more flexible than the prior test. It focuses on economic realities – in other words, if the employer is the primary beneficiary, the intern must be compensated as an employee.  On the other hand, if the intern primarily benefits from the relationship, the internship can be unpaid.  The DOL indicated that it would consider the following seven factors in the analysis:

  • 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.

While the prior test required employers to meet all six factors, the factors outlined for consideration in the primary beneficiary test are non-exhaustive, which should allow employers a bit more breathing room in structuring unpaid internship programs, especially when students are involved.

In addition to wage and hour issues, it’s important to be alert to other requirements governing your interns.  For instance, states may impose laws more stringent than the DOL’s rules interpreting the FLSA. Also, as we’ve also covered recently, an increasing number of states are considering and passing laws aimed at curbing sexual harassment in the workplace. Some of these laws (for instance, New York City’s) even include sexual harassment training requirements for interns who work for a specified amount of time. And, note that the considerations are different for employers with paid internship programs. Such employers may need to consider additional issues, such as possible coverage under some of the state and federal laws that protect employees.

So, as you prepare to welcome this year’s crop of interns to your office, in addition to checking off orientation, work assignments and welcome packets from your to-do list, consider reaching out to your favorite Troutman Sanders employment attorney to ensure your program is in tip-top shape by before you welcome this summer’s group aboard.