DOL issues new guidance for lawful unpaid internships

In the United States, our laws assume that work is to be paid. But what about unpaid internships?

Now that federal appeals court overturned previous guidance on when interns can be unpaid, the Department of Labor has adopted a new test based on that ruling. Previously, for unpaid internships to be legal under the Fair Labor Standards Act, employers had to prove that those internships met all factors of a multifactor test. Now, the DOL will consider whether the intern or the employer is the primary beneficiary of the relationship.

As we discussed recently, the Second Circuit Court of Appeals issued a landmark ruling on the subject in 2016: Glatt v. Fox Searchlight Pictures. The Court ruled that the relationship between employer and intern should be evaluated based on the totality of the circumstances. If, on balance, the benefit of the internship went to the intern, it is permissible for the internship to be unpaid. If, on the other hand, the employer primarily benefits, the intern must be paid.

The DOL incorporated the Glatt factors in its new test, which, while similar to the DOL’s previous test, is structured with the goal of determining the primary beneficiary of the internship. The test contains the following seven factors, but these factors are not exhaustive:

• Both the intern and the employer understand that there is to be no compensation.
• The internship provides training similar to that in an educational environment.
• Completion of the internship entitles the intern to academic credit.
• The internship corresponds to an academic calendar.
• The internship lasts only as long as it takes to educate the intern.
• The work of the intern complements, rather than displaces, paid employees’ work while conveying substantial educational benefits.
• Both the intern and the employer understand that the intern is not entitled to a job at the completion of the internship.

Will the new rule promote more unpaid internships?

The answer to this question is unclear. Unpaid internships are controversial for several reasons, and they may well have been overused during the recent recession when employers were hunting for ways to cut labor costs.

The DOL’s new test is less rigid than the old one, which may make unpaid internships less costly for employers to administer. However, the basic purpose of the unpaid internship — providing opportunities for vital on-the-job training and experience, primarily to benefit interns — has not changed. When interns spend most of their time on drudge work or perform work that displaces paid workers, the internship must be paid.

If you are an unpaid intern and believe your employer is benefiting more than you are, you should consider contacting an employment law attorney for an evaluation of your situation.