While the federal Fair Labor Standards Act (FLSA) requires for-profit employers to pay “employees” for their work, interns and students may not be employees under the FLSA. The U.S. Department of Labor (DOL) and many courts use the “primary beneficiary” test to determine whether an intern or student is, in fact, an employee under the FLSA. This test examines the “economic reality” of the intern-employer relationship to determine which party is the “primary beneficiary” of the relationship. The following seven factors are included in the test:
- 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.
The primary beneficiary test is flexible, and no single factor is determinative. Instead, whether an intern or student is an employee under the FLSA depends on the unique circumstances of each case. If analysis of these circumstances reveals that an intern or student is actually an employee, then he or she is entitled to both minimum wage and overtime pay under the FLSA.
Click here for more information from the DOL.
Check out our Employee Pay Rules section to learn more about federal rules regulating employee pay.