Courts reject old six-part test in favor of different standard

 

It just became a little easier to figure out how interns should be paid, thanks to several recent court decisions.

 

After the latest case, Benjamin et al. v. B & H Education, the Dept. of Labor (DOL) revamped its test to determine whether interns and students should receive minimum wage and overtime per the Fair Labor Standards Act (FLSA).

 

And the new test is clearer for companies and Payroll pros.

 

Who benefits most?

 

The Ninth Circuit Court of Appeals upheld a decision in favor of cosmetology school that had its students work at salons in exchange for credits toward a license.

 

The students tried to say they were entitled to wages under the FLSA. But the Ninth Circuit disagreed, saying the school’s arrangement to give students credit was legally acceptable.

 

Rather than use the DOL’s old six-part test to determine the students’ employment status, the court opted to use the “primary beneficiary” test.

 

In a nutshell, the test answers one question: Who benefits more from the internship, the employer or the intern?

 

If it’s the employer, the interns must be treated as employees under the FLSA. However, if it’s the intern, that standard doesn’t apply.

 

The primary beneficiary test looks at the “economic reality” of the relationship between interns and employers, considering factors such as:

 

The extent to which interns understand they won’t be compensated or receive a paid job after the internship (although paid internships may muddy the waters)

 

Whether the intern’s work complements (instead of replaces) the work of paid employees

 

If the internship provides training that’s similar to instruction received in an educational setting

 

Whether the intern receives school credits for the internship, and

 

If the internship aligns with the intern’s academic schedule.

 

The DOL’s adjusted its internship guidance to align with the primary beneficiary test. That’ll give companies more flexibility – and help you stay in compliance when paying interns.

 

More info: bit.ly/intern547