Employers often use unpaid interns and volunteers in their businesses. The Fair Labor Standards Act (FLSA) has strict rules regulating those categories. Failure to follow those rules can result in expensive penalties from the federal Department of Labor.
The FLSA uses a “primary beneficiary test” to determine whether someone should be classified as an unpaid intern or an employee. The DOL has an explanatory fact sheet about internship programs on its website: Fact Sheet #71: Internship Programs Under The Fair Labor Standards Act | U.S. Department of Labor (dol.gov). The primary beneficiary test considers seven factors:
- Whether the intern and the employer clearly understand that there is no expectation of compensation.
- Whether the internship provides training similar to that which would be given in an educational environment, such as clinical and hands-on training.
- Whether the internship is tied to coursework or the receipt of academic credit.
- Whether the internship accommodates the intern's academic commitments by corresponding to the academic calendar.
- Whether the internship's duration is limited to the period in which the internship provides beneficial learning.
- Whether the intern's work complements, rather than displaces, the work of paid employees.
- Whether the intern and the employer understand there's no entitlement to a paid job at the conclusion of the internship.
The test focuses on the economic reality of the intern-employer relationship to determine who is primarily benefiting from the relationship. If the work performed by the intern primarily benefits the employer, the intern is an employee under the FLSA and must be paid.
Employers must also be careful in their use of unpaid volunteers. Persons who volunteer or donate their services, usually on a part-time basis, for public service, religious or humanitarian objectives, and without contemplation of pay, are not considered employees of the religious, charitable or similar non-profit organizations that receive their service. It is critical to note that under the FLSA, employees may not volunteer services to for-profit private sector employers.
John Falcone and Luke Malloy handle employment law matters at PLDR Law. Feel free to contact us if you have questions about this matter.
