Department of Labor Relaxes Rules for Unpaid Internships

January 2018. Employers will have an easier time establishing that an unpaid internship is legal.

In early January of 2018, the Department of Labor (DOL) announced that it will use a new test to assess the legality of unpaid internships. This change will make it easier for private, for-profit employers to hire unpaid interns, although employers will still need to follow certain guidelines. Nonprofit employers and government employers are generally allowed to have unpaid internships without meeting the test described below.

For many years, the DOL applied a strict test to unpaid internships, in which employers had to meet all of the following six requirements:

  • The work is similar to training that would be given in an educational environment.
  • The internship experience is for the benefit of the intern.
  • The intern isn’t displacing regular employees and is closely supervised by the company.
  • The employer doesn’t gain any immediate benefit from the intern’s work.
  • The intern is not necessarily promised a job at the end of the internship.
  • The employer and the intern understand that the internship is unpaid.

However, this six-prong test was challenged through the courts and rejected by multiple federal appeals courts as too rigid. These courts instead adopted a more flexible test that weighs various factors to determine whether the internship is primarily for the benefit of the intern.

In response, the DOL decided to adopt this “primary beneficiary” test set forth by the courts. In Factsheet #71: Internship Programs Under the Fair Labor Standards Act, the DOL identifies the following seven factors that should be considered and weighed:

  1. 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.
  1. 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.
  2. The extent to which the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit.
  3. The extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic calendar.
  4. The extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning.
  5. 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.
  6. 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.

Unlike with the previous internship test, no one factor is determinative or will render an unpaid internship illegal. Instead, whether an unpaid internship is legal will depend on the individual circumstances of each case.

Effective date: January 2018.