• Paul Peter Nicolai

DOL Guidance adds Flexibility for Free Internships

When done right, internships give students experience that cannot be learned in the classroom and provide employers with a chance to nurture the next generation of professionals.

A wave of high-profile lawsuits and media reports alleged unfair working conditions in unpaid internship programs in the entertainment and publishing industries. There was a crackdown on companies misclassifying employees as unpaid interns. This led to curtailment of internship programs for fear of facing lawsuits and penalties.

A major problem was the uncertainty of who was an employee who needed to be paid and who could be classified as a true intern who could work without pay. The old U.S. Department of Labor guidance was based on a case from the 1940s about railroad company trainees. It was also very rigid. Every one of six requirements had to be met for a person to be seen as a true intern by the Department of Labor.

Last year the Department of Labor issued a new guidance on unpaid internships formally adopting the primary beneficiary test. The new guidance begins with the premise that for-profit employers must pay their employees for the work they do and it acknowledges interns and students may not be employees and do not have to be paid.

The guidance lists the seven factors to be taken into consideration in determining who is the primary beneficiary of the internship relationship and whether the worker is an employee who must be paid, such as the extent ot 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.

  • 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.

  • Internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit.

  • Internship accommodates the intern’s academic commitments by corresponding to the academic calendar.

  • Internship’s duration is limited to the period in which the internship provides the intern with beneficial learning.

  • Intern’s work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern.

  • Intern and the employer understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship.

While the new guidance is more flexible, it does not provide employers clear answers about whether their interns are employees or not. The application of the factors depends greatly on the particular facts of each situation and involves judgment calls about which there could be disagreement.

Experts recommend employers should develop formal internship programs with clear policies and consistent oversight. Some elements include: (1) designating a manager to serve as an internship program coordinator; (2) partnering with one or more educational institutions in designing the program to ensure academic credit; (3) focusing on developing projects and assignments that provide meaningful training and experience rather than just busywork.

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