In 2010 the U.S. Department of Labor (DOL) issued Fact Sheet # 71 narrowing the definition of what qualified as an unpaid internship. The definition, or more technically speaking…the six-part test, defined a true unpaid internship very narrowly. The 2010 Fact Sheet stated that in order for a for-profit company to engage a true unpaid intern, the job the person was doing had to mirror the type of instruction received in class, and the employer could “derive no immediate advantage” from the intern’s activities.

Back then the Department of Labor’s new definition of intern was challenged by employers in the Courts, and the issue eventually rose to the U.S. Federal Appellate Courts with the Second Circuit in Glatt v. Fox Searchlight Picture Searchlight rejecting the Department of Labor’s interpretation of the Fair Labor Standards Act law in 2015. Even Michigan’s own Sixth Circuit of Appeals, that can be fairly pro-worker, rejected the DOL’s narrow criteria. So the Sixth Appellate Court and several others subsequent to the Glatt decision used a list of seven non-exhaustive factors that looked at who was the “primary beneficiary” of the internship. The criteria coming from the principal that if the intern-student is found to primarily benefit from the intern relationship it can be unpaid. Late last year, the more liberal leaning Ninth Circuit Court of Appeals also followed the Second Circuit in rejecting the DOL’s previous criteria.

The seven criteria the Appeals Courts embraced are:

1. Do the intern and employer clearly understand that there is no expectation of compensation for the job?
2. Does the internship provide training that would be similar to that given in an educational environment?
3. Is the internship tied to a formal education program with coursework and/or academic credit?
4. Does the internship fit into the intern’s academic calendar?
5. Is the length of the internship limited to a period where they are provided with beneficial learning?
6. Does the intern’s work assist or complement the work of paid employees instead of displacing them?
7. Does the intern understand that the intern is not automatically entitled to a paid job at the conclusion of the internship?

With that, the Trump Administration DOL announced just last week (January 5^th) that it would start conforming to the appellate court rulings and use the “primary beneficiary” test going forward. Further  unlike its position on the previous Six Factor test, the DOL said not all seven factors in the primary beneficiary test must be met. Therefore, further easing what it takes to have a compliant unpaid intern.

Employers should understand that this new position does not open up any position labeled “internship” to unpaid status legally. Arguably, the DOL adopted the narrow rule in 2010 because employers were found to be abusing that status.

Employers that wish to offer internships that are unpaid should set up these programs in cooperation with the intern’s school and tie the job activities to the intern’s academic credits if possible. Clear policies, forms, and intern agreements are recommended. Also, employers need to check state law on internships and payment of wages. If there is a stricter state law or city ordinance even, then those laws would apply.

Sources: US Department of Labor News Release 1/5/2018; Seyfarth Shaw LLP DOL Bids Adieu to SixFactor Internship Test 1/11/2018; Bradley Arant Boult Cummings LLP Labor and Employment Blog. “I’m Just an Intern!” DOL Changes Course and Adopts Primary Beneficiary Standard for Intern Compensation Cases 1/9/2019; Ogletree Deakins DOL Gives Credit to Unpaid Student Interns After Getting Schooled By The Courts. 1/9/2018