The US Department of Labor recently addressed an issue which remains near and dear to many students in this tumultuous economy. The question of whether for-profit businesses may continue to employ interns with no compensation has been answered in the affirmative. Unpaid internships provide accessibility of meaningful work experience to students whose resumes would otherwise be passed over in favor of individuals with more work experience. Many companies, able to pick from the sometimes-saturated pool of recent graduates, are skeptical about hiring recent graduates or students with little to no practical work experience. In response to this skepticism by administrators, hiring personnel have historically offered unpaid positions to students who may offer a benefit to the business, even if their work-product may have to be reviewed more aggressively than that of a more seasoned professional.
The Department of Labor seems to have aligned itself with the stance that employers may need to be incentivized to offer employment opportunities to students with little to no work experience. These opportunities are usually structured to foster experience. Lack of pay has taken a backseat to the hopes of molding future talent. Employers interested in creating internship opportunities for current students should be cognizant of the new primary-beneficiary test adopted by the Department of Labor for evaluating permissible unpaid internships. Unlike the prior six-factor test used to determine whether an unpaid internship was valid, the new “primary beneficiary test” does not require that all factors be met. Instead, the “primary-beneficiary test” asks courts to look at the totality of the circumstances, by weighing the following factors to determine who is the “primary beneficiary” of the relationship:
- Both the intern and employer understand that there is no expectation of compensation for any work completed;
- The internship is structured to provide training and experience similarly found in an educational institution;
- The internship is tied to an educational institution and provides integrated coursework
- The completion of the program entitles the intern to academic credit
- The internship corresponds with the intern’s academic calendar
- The internship is limited to the period when the internship educates the intern;
- The intern’s work complements rather than displaces the work of paid employees while providing significant educational benefits.
- Both the intern and the employer understand that completion of the internship does not entitle the student to paid employment at its end.
Compliance with this seven-factor test may be monitored by HR professionals or legal staff.
This article was written by Nezar Habhab, Law Clerk
