On January 5, 2018, the Department of Labor announced two employer-friendly changes applicable to interns and volunteers. Specifically, the DOL has adopted an employer-friendly approach to internships and has reinstated a Bush-era opinion letter related to volunteer coaches. This newsletter summarizes those changes.
A. The “Primary Beneficiary” Analysis for Internships
Determining when an unpaid intern is actually an employee has been a moving target for the last several years. On January 5, however, the Department of Labor announced that its Wage and Hour Division will now use the “primary beneficiary” test to make this determination.
The “primary beneficiary” test is the standard that numerous appellate courts have adopted over the last several years, but it marks a shift from the DOL’s previous six-factor test, which kept a thumb on the scale for finding an employment relationship existed. The six factors were:
- The internship is similar to training that would be given in an educational environment, even if it includes actual operation of the facilities of the employer;
- The internship experience is for the benefit of the intern;
- The intern does not replace regular employees;
- The employer derives no immediate advantage from the intern’s activities;
- The intern is not necessarily entitled to a job at the end of the internship; and
- The employer and intern understand that the intern is not entitled to wages.
This test faced constant scrutiny and was challenged in several different courts.
The DOL’s newly adopted test requires consideration of the following seven factors:
- Do the intern and employer clearly understand that there is no expectation of compensation for the job?
- Does the internship provide training that would be similar to that given in an educational environment?
- Is the internship tied to a formal education program with coursework and/or academic credit?
- Does the internship fit into the intern’s academic calendar?
- Is the length of the internship limited to a period where they are provided with beneficial learning?
- Does the intern’s work assist or complement the work of paid employees instead of displacing them?
- Does the intern understand that the intern is not automatically entitled to a paid job at the conclusion of the internship?
Although this change is good news for employers, it does not make it open season to set up unlimited unpaid internships. Interns may still bring suit and win, depending on the facts of the case. For unpaid internships, employers should still try to partner with educational programs and attempt to award the intern with some form of academic credit. If that is not a viable option, the safest course is still to pay interns at least minimum wage and overtime as appropriate.
B. Revived Opinion Letters Regarding Volunteers and Community Workers
In addition to the revised internship analysis, the Department of Labor has revived several opinion letters from the Bush era, including one notable opinion letter pertaining to volunteer coaches for public school athletic teams.
Letter FLSA 2018-6 concludes that volunteer coaches for public school athletic teams fell under the teacher exemption under Section 13(a)(1) of the Fair Labor Standards Act (FLSA) and thus were not due minimum wage or overtime compensation. In this scenario, the school had no full-time coaches on its faculty. Instead, community members volunteered to coach the school athletic teams. These volunteer coaches spent most of their time instructing student athletes on the rules of the game and developing the necessary skills for that sport. The coaches also spent time recruiting new team members, supervising students during the commute to and from games, and keeping up with team equipment.
The FLSA exempts from the minimum wage and overtime requirements “any employee with a primary duty of teaching, tutoring, instructing or lecturing in the activity of imparting knowledge and who is employed and engaged in this activity as a teacher in an educational establishment by which the employee is employed” (29 C.F.R. 541.303(a)). Another provision of the same regulation makes clear that coaches fall into this category because they are “faculty members who ... spend a considerable amount of their time in extracurricular activities such as coaching athletic teams.” The DOL concluded that as long as the volunteer coaches were not also employed by the school district in a separate nonexempt capacity, they met criteria for the teacher exemption.
The DOL is on a roll in dialing back employee-friendly regulations and analyses from the previous administration. Employers should be on the lookout for additional changes.