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.



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