Why it matters

Reinforcing a shift in policy, the Department of Labor (DOL) reissued 17 opinion letters on a variety of topics under the Fair Labor Standards Act (FLSA) that had been withdrawn under the Obama administration. Renumbered FLSA 2018-1 through FLSA 2018-17, the letters cover issues ranging from the exempt status of specific job positions in certain industries to whether bonuses or other payments should be included in calculating employees’ regular rates. In other DOL news, the agency announced that going forward it will follow the U.S. Court of Appeals for the Second Circuit’s “primary beneficiary” test to determine whether interns are employees under the FLSA. “The Wage and Hour Division will update its enforcement policies to align with recent case law, eliminate unnecessary confusion among the regulated community, and provide the Division’s investigators with increased flexibility to holistically analyze internships on a case-by-case basis,” the DOL said.

Detailed discussion

Under the Obama administration, the Department of Labor (DOL) stopped the practice of issuing opinion letters, which answer specific questions that have been submitted to the agency and provide guidance for employers. Instead, the agency published “Administrator’s Interpretations” on topics such as the line between employees and independent contractors and joint employment, both of which were withdrawn when Alexander Acosta took the helm as Secretary of Labor last year.

Now the Acting Administrator of the Wage and Hour Division (WHD), Bryan L. Jarrett, has reissued some of the opinion letters that were withdrawn in 2009. The agency did not provide an explanation for the resuscitation of the letters, simply stating that it “further analyzed” them and reissued them in verbatim text as “an official statement of the WHD policy and an official ruling for purposes of the Portal-to-Portal Act.”

The letters touch on a host of issues under the Fair Labor Standards Act (FLSA). Renumbered FLSA 2018-1 through FLSA 2018-17, the letters discuss the salary basis test for exempt status (in FLSA 2018-7 and FLSA 2018-14) as well as the exempt status for specific positions such as civilian helicopter pilots (FLSA 2018-3); client service managers of an insurance company (FLSA 2018-8); residential construction project supervisors (FLSA 2018-10 and FLSA 2018-17); and consultants, clinical coordinators and business development managers of a healthcare placement company (FLSA 2018-12).

Other letters cover whether a plumbing repair and service business qualifies as a retail or service establishment exempt from overtime pursuant to Section 7(i) of the FLSA (FLSA 2018-2), when certain bonuses or other payments should be included in calculating employees’ regular rate of pay under Section 7(e) of the statute (FLSA 2018-5, FLSA 2018-9 and FLSA 2018-11) and whether a nonprofit fire company and for-profit company are joint employers of the nonprofit volunteers (FLSA 2018-16).

The same day, the DOL also announced a change in policy with regard to the applicable test for determining whether interns and students are employees under the FLSA. Since April 2010, the agency has applied a six-factor test that must be met before an unpaid intern could be excluded from the pay requirements of the FLSA.

However, in the years since, multiple courts have passed on using the test, most notably the U.S. Court of Appeals for the Second Circuit in a 2016 case involving former interns for Fox Entertainment seeking wages and overtime under the FLSA. In Glatt v. Fox, the federal appellate panel reversed certification of a nationwide class and summary judgment on the issue of whether the interns were employees, expressly rejecting the district court’s use of the DOL’s “too rigid” six-part test.

Instead, the Second Circuit created a “non-exhaustive set of considerations” for courts to weigh when answering the question of whether the intern or the employer was the “primary beneficiary” of the relationship. Factors include whether an internship tied into academic coursework, whether an intern received academic credit for the position and whether the internship accommodates academic commitments by corresponding to the school calendar.

Courts across the country followed suit, using the Second Circuit’s test in lieu of the DOL’s factors. In addition to the Eleventh Circuit, the Ninth Circuit recently eschewed the DOL test in favor of Glatt.

That defection proved the final straw for the DOL, with the agency releasing an amended Fact Sheet #71 to track the primary beneficiary test. “[N]o single factor is determinative,” according to the fact sheet, and “whether an intern or student is an employee under the FLSA necessarily depends on the unique circumstances of each case.”

The test consists of seven factors:

  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.
  2. 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.
  3. The extent to which the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit.
  4. The extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic calendar.
  5. The extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning.
  6. 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.
  7. 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.

Going forward, the DOL will conform to the primary beneficiary test used by the courts, the agency said. “The Wage and Hour Division will update its enforcement policies to align with recent case law, eliminate unnecessary confusion among the regulated community, and provide the Division’s investigators with increased flexibility to holistically analyze internships on a case-by-case basis.”

To read revised Fact Sheet #71, click here.