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The New Seven Factor Test For Unpaid Interns (Part 2)

In this second part of a two-part blog, Total HR Management will examine in depth the new seven factor test for unpaid interns that has been embraced by both the courts and the United States Department of Labor (DOL). Replacing the six factor test that made it almost impossible for companies to use students and young people as unpaid interns, the new criteria are more flexible and holistic. Rather than making absolute judgments across the board, they assess each case individually, allowing specific circumstances to define any final decision.

The key to the new seven factor test is expanding the idea of what it means to be a “primary beneficiary” of an unpaid internship. In the past, such a relationship was defined largely from the perspective of whether or not the company was receiving any benefit that resembled paid employment from the work being done by the unpaid intern.

Rather than employ an all-or-nothing approach in terms of such benefits, the DOL believes that the unique circumstances of each case need to be examined. As a result, the new seven factor test has been developed.

Detailing The Seven Factor Test

Below is a detailed look at the following seven factors that are now being used by the United States Department of Labor to determine whether or not an individual is an unpaid intern:

  1. Do both the intern and the employer clearly understand that there is no expectation of compensation? There cannot be a promise of compensation that is even implied. Such a promise suggests that the intern is an employee being employed by the employer.
  2. Does the internship provide training that is similar to that which would be given in an educational environment? Does such training include the technical aspects of the profession and other hands-on training provided by educational institutions?
  3. To what extent is the internship is tied to the intern’s formal education program? Does the internship include integrated coursework or the receipt of academic credit by the intern at their school?
  4. To what extent does the employer accommodate the intern’s academic commitments? Does the job correspond to the academic calendar? If so, is the intern able to meet such required educational commitments while doing the internship?
  5. Is the internship’s duration limited to the period in which the internship provides the intern with beneficial learning? Is the focus of the time spent during the internship educational for the intern or busy work for the employer?
  6. To what extent does the intern’s work complement the work of paid employees as opposed to displacing the work of actual employees? While complementing paid employees, does the intern’s unpaid work also provide significant educational benefits to the intern?
  7. Do both the intern and the employer understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship? Is it clear that the internship is educational in nature and not a training period that is leading to future compensation?

A Bigger Picture As Opposed To Determinative Factors

seven factor test

Students and the Seven Factor Test

The goal of the seven factor test is to provide a bigger picture of the unpaid internship that clearly shows that it is educational in nature. When it comes to the above questions, there is no single factor that is determinative. The DOL sees this new perspective as both a positive push in the right direction and a warning as well. It cautions that whether an individual is properly classified as an unpaid intern will depend solely on the unique facts of any particular case. As a result, such facts will be closely examined.

Given this close examination, Total HR Management wants to make sure that our client companies are crossing the t’s and dotting the i’s. In other words, although unpaid internships are now a possibility, both caution and precision in regards to the process are recommended. Before allowing a student to intern at your company, you need to examine the “economic reality” of your true relationship with potential interns, review the new DOL Fact Sheet on unpaid interns, and examine the impact of such a step in regards to both federal and state wage and hour laws.

Total HR Management Can Help

In this process of making sure that everything is in order, Total HR can help. As a professional employer organization, Total HR Management will advise our client companies on what actions to take on both the Federal and the state level of regulatory compliance. To learn more about how Total HR Management can support your company and answer your questions, please contact us today. Take the first smart step and call (800) 975-5128 today to access the support you need to move forward.

 

 

No Legal Advice Intended: This blog includes information about legal issues and legal questions. Such materials are for informational purposes only and may not reflect the most current legal developments. These informational materials are not intended, and should not be taken, as legal advice on any particular set of facts or circumstances. You must not rely on the information on this website as an alternative to legal advice from your attorney or other professional legal services provider.

 

Department Of Labor Opens The Door For Unpaid Internships (Part 1)

For years, Total HR Management has warned our client companies to avoid unpaid internships for students and young people. The United States Department of Labor (DOL) had made such internships very hard to justify due to its six factor test that determined coverage under the Fair Labor Standards Act (FLSA). On January 5, 2018, the DOL abandoned its six factor test for assessing whether a worker is an intern or an employee.

Citing four separate appellate court rulings that had rejected DOL’s six factor test, the DOL announced that it would use a new “primary beneficiary” test to determine the “economic reality” of whether an individual is an intern or an employee. In other words, the DOL saw the tide changing on the appellate level and decided to shift as well. Such a shift makes sense because unpaid internships historically have been a key part of many young people’s education.

Abandoning Six Factor Test for Unpaid Internships

unpaid internships

Unpaid Internships and the Modern Student

Over the years, the six factor test has been viewed as difficult to apply and extremely broad, particularly the factor that the employer gains “no immediate advantage from the activities of the intern.” Indeed, such a clause made unpaid internships virtually impossible to justify by any company. How could an intern work to any degree in a company without providing that company some kind of positive advantage? After all, doesn’t the definition of work itself in any form imply an advantage by the very virtue of that work?

Given the need for unpaid internships so young people can develop skills and learn first-hand in high-level workplace environments, the DOL has moved beyond the six factor test. Instead, the new seven factor test, as framed by the Second, Sixth, Ninth, and Eleventh Circuits, is seen to be a more flexible and holistic approach towards the very idea of an internship. Developed by several federal appellate courts, the seven factor test allows judges to examine the “economic reality” of the intern-employer relationship to determine the “primary beneficiary” of the internship. In the second part of this two-part blog, the new seven factor test will be examined in detail.

Wage And Hour Division Updates Internship Test

Given the change of Federal policy, the DOL’s Wage and Hour Division is in the process of updating its enforcement policies to replace the six factor test with the new seven factor test. After all, if a company embraces the new policies, they should not be punished for taking a progressive stand that had been rubber-stamped by the DOL. Since government bureaucracies tend to change slowly when new policies are instituted, the goal of the DOL communicating with the courts is to make sure that no company is caught in the middle. Proactive change to adapt to new policies is a process that should be rewarded and congratulated.

From this perspective on the new federal employment policy, the DOL has revised the intern-versus-employee test to make it easier for employers to use and implement. However, Total HR Management wants to highlight that such changes only apply to the Federal level of regulations. Thus, employers need to be aware of state laws, particularly the question of whether their states employ a stricter version of this test. For example, eleven separate factors relevant to determining whether an unpaid intern should be considered an employee under New York law are defined by the New York Department of Labor.

Total HR Management Can Help

As a professional employer organization, Total HR Management will advise our client companies on what actions to take on both the Federal and the state level when it comes to such regulatory compliance. To learn more about how Total HR Management can help answer questions about unpaid internships and your company, please contact us today. Take the first smart step and call (800) 975-5128 today to access the support you need to move forward.

 

No Legal Advice Intended: This blog includes information about legal issues and legal questions. Such materials are for informational purposes only and may not reflect the most current legal developments. These informational materials are not intended, and should not be taken, as legal advice on any particular set of facts or circumstances. You must not rely on the information on this website as an alternative to legal advice from your attorney or other professional legal services provider.

 

How A PEO Can Help Your Company With FLSA Employee Travel Compliance And On-Call Pay Regulations

FLSA Compliance HelpIs your company aware of the United States Department of Labor regulations involving Fair Labor Standards Act (FLSA) employee travel compliance and on-call pay? Total HR Management can help your company avoid any travel-oriented issues by ensuring FLSA employee travel compliance.

FLSA Employee Travel Compliance

When it comes to FLSA requirements involving employee travel time being treated as working time, there are a number of gray areas. As a basic rule, “home to work” and “work to home” travel time is not work time. This is true even if the employee’s commute is greater than normal or the employee uses a company car for their commute. The employee must not, however, be performing additional work activities while commuting.

For example, the time spent by an employee writing a report is work time, even if it happens to occur while the employee is riding on a bus or a train to or from work. In addition, if an employee makes a work-related stop while commuting, the time to that stop is considered work time.

All In A Day’s Work Travel Time

Travel time that is designated as being “all in a day’s work” is work time. For example, if an employee is travelling in between work sites during the day, “all in a day’s work” begins when he arrives at the first work site, either the home office or an external site. The first work site is defined as the place where the employee first performs work activities.

For example, any employee who travels to the office and picks up needed equipment, then goes to a work site to perform the day’s activities is working from the time they first arrive at the office. Since work is being done by picking up the equipment, the office is the first work site of the day.

Challenge of Nonexempt Employees

 

Although a company does not need to pay nonexempt employees for their commuting time to and from the workplace, the question of when to pay nonexempt workers for travel locally or on overnight trips can be confusing. Mistakes can spark anything from what seem like trivial complaints to the nightmare of class-action lawsuits, both of which you clearly want to avoid. According to the Fair Labor Standards Act (FLSA) rules on compensating hourly employees for travel time, if the travel is for the company’s benefit, is compensable. If it is purely commuting, it’s not.

employee travel compliance

FLSA Employee Travel Compliance Is Essential

If an employee or a nonexempt employee travels out of town, the time spent traveling to and returning from the other city is work time. Although you can exclude the employee’s regular commuting time and meal breaks, this must be done carefully. Although travel time to the airport is defined in the same way as travel time to the office, everything after should be compensated as work hours, except the drive home from the airport upon the employee’s return. The only exclusion would be meal times. However, if the travel to or from the airport is longer than the employee’s normal commute, the extra mileage and time need to be recorded and compensated.

Total HR Management can help transform this complex regulatory web into clear rules and regulations in your employee handbook. You need to make sure nonexempt employees understand when they will be paid before they travel in advance. All of these regulations should be clearly outlined in your employee policies. We can help train your management staff on the FLSA rules for rest periods, on-call time, training and more.

The Challenge Of On-Call Time

Employees required to remain on-call on the employer’s premises are considered working while on-call. Employees required to remain on-call at home or while out on their own are considered not working while on call. The challenge of on-call time has been simplified by modern cellular technology. Employees are paid for waiting time when they are “engaged to wait.” Employees fall under that definition if they are required to be at a work site while waiting to perform work.

When an employee has gone home after completing his or her day’s work and is subsequently called out at night to perform an emergency job for one of the employer’s customers, all time spent traveling is work time. The Wage and Hour Division of the Department of Labor, however, has not addressed whether travel to and from the regular workplace in an emergency after hours call is work time.

Travel Rules & Remote Employees

 

In terms of remote employees, they need to be paid for any travel time taken to deliver their work. If the employee is home-based, but needs to deliver hard copies of their work to the office, that time must be compensated. Homeworkers must be paid for time spent traveling to and from the distribution point to pick up or deliver their work or for face-to-face meetings with their superiors.

Overall, Total HR Management understands if the rules and regulations about FLSA employee travel compliance seem overwhelming. We can help. Please call Total HR Management at (800) 975-5128 to schedule an HR audit for your company.

 

 

No Legal Advice Intended: This blog includes information about legal issues and legal questions.  Such materials are for informational purposes only and may not reflect the most current legal developments.  These informational materials are not intended, and should not be taken, as legal advice on any particular set of facts or circumstances. You must not rely on the information on this website as an alternative to legal advice from your attorney or other professional legal services provider.

 

Total HR Questions & Answers #5: Is It Okay To Have People Volunteer To Work At Our Business Without Being Paid?

volunteer, peo, human resources

Volunteer Workers Okay?

In Total HR Questions & Answers, our PEO (professional employer organization) experts provide answers to questions posed in the present and the past by the management teams of our client companies and potential clients. The goal is to provide professional human resources oriented answers to challenging questions. The fifth question in this ongoing series is about whether or not it is okay to have people volunteer to work at your business without being paid.

Human Resources Question:

In this challenging economy, more and more young people are offering to volunteer at my business without being paid. Several seniors want to volunteer as well. Is it okay to have such people volunteer to work at my business without paying them?

Human Resources Answer:

This is a tough question because the answer is unclear and even legally uncertain under the terms of the federal Fair Labor Standards Act (FLSA). It is important to understand the distinctions made by the federal government. The Department of Labor says that people can, under limited circumstances, donate time as non-employees for “humanitarian, public-service, religious, or charitable reasons.”

The key distinction from this rule is that people cannot volunteer unpaid services to an employer which are the same as, similar to, or related to their normal jobs. Even more important, the Department of Labor strongly implies that volunteering is almost always restricted to non-profit settings. There are a number of other factors that need to be taken into consideration. These factors include things like —

  • Whether the services are done for truly altruistic motives
  • Whether the work done is a kind typically associated with volunteer work
  • Whether the time commitment is less than a full-time occupation
  • Whether the volunteerism displaces staff or impairs employment opportunities
  • Whether the volunteer work involves only “nominal” or “minimal” control by the recipient of the volunteer work
  • Whether the work is scheduled or whether it tends to occur at times convenient to the volunteer

From the perspective of Total HR Management, volunteer work is allowed in certain circumstances, but permitting it means wading into potentially dangerous waters. Since the FLSA lays out such stringent rules with a strict take on the nature of volunteerism, it is better not to take an unnecessary risk. If you have any questions, please contact Total HR Management for help by calling (800) 975-5128 or emailing our human resources outsourcing experts at info@totalhrmgmt.com.

 

No Legal Advice Intended: This blog includes information about legal issues and legal questions.  Such materials are for informational purposes only and may not reflect the most current legal developments.  These informational materials are not intended, and should not be taken, as legal advice on any particular set of facts or circumstances. You must not rely on the information on this website as an alternative to legal advice from your attorney or other professional legal services provider.

The Department of Labor’s Plan/Prevent/Protect Program — How The New Approach To Federal Contractors Will Affect Your Business

When you work for a Federal Contractor, you take on a bundle of Federal regulations and labyrinthine affirmative action plans. In the past, it was a relief when you discovered that a potential client was not a Federal Contractor. Unfortunately, due to the U.S. Department of Labor’s new “Plan/Prevent/Protect” program, those days now appear to be over. Under the new policy, companies will be subject to regulatory citations even when substantive violations do not exist. What Total HR Management wants our PEO clients and potential human resources outsourcing clients to understand is that your company will be ready for this big shift in Federal policy as we prepare to help you implement and enforce the new regulations.

 

United States Department of Labor's New Regulations

Since DOL resources are limited (reflecting the overall state of the country in difficult times), Secretary of Labor Hilda Solis decided that the current “catch me if you can” system was far from effective. On April 26, 2010, the DOL released a description of the new approach to enforcement entitled, Plan/Prevent/Protect: The Beginning of a Broader Regulatory and Enforcement Strategy. The new agenda of regulatory procedures will be used by the Occupational health and Safety Administration (OHSA), the Mine Safety and Health Administration, the Office of Federal Contract Compliance Programs (OFCCP), and, arguably most importantly, the Wage and Hour Division (WHD).

Although the details have yet to be fully released, the overall approach as described by Secretary Solis focuses on the implementation of “compliance action plans” that are broken down into three objectives that reflect the name of the program. Based on research done, Total HR outlines the three objectives as follows:

 

The DOL's New Plan, Prevent, and Protect Program

1.   PLAN — Employers would be required to create a plan for identifying and fixing risks of legal violations.

2.   PREVENT — Both employers and employees in unison would implement the plan. Employers would be responsible for monitoring the compliance of their company in regards to such implementation procedures.

3.   PROTECT — Employers will become responsible for ensuring that the workplace rights of their employees are safeguarded from violations by being placed under the umbrella of the new compliance program.

Total HR Management recognizes the potential impact of these new DOL regulations on our client companies. As a result, specific procedures and implementation strategies are being designed to help our clients make this new program into a concrete reality. By shifting the basic compliance model from a passive approach to a proactive responsibility, employers suddenly have the new role of ensuring that the laws are not violated within their companies. When the change comes, Total HR will be ready to ensure that our PEO clients are prepared to make the shift into the new proactive stance on employee regulations as outlined by the United States Department of Labor.


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