Certain workers — students and interns — may not be considered “employees” under the Fair Labor Standards Act (FLSA). The FLSA requires, among other things, that employers pay employees for all time worked, including at least minimum wage and overtime, if applicable. Workers who are not employees within in the FLSA’s definition may not be entitled to the same.

The Department of Labor (DOL), in line with case law, adopts the “primary beneficiary test” when looking at whether students or interns fall within the purview of FLSA as employees or not. This test digs deeper into the economic reality of the internship. Essentially, it asks: who benefits more from the experience, the intern or the employer?

The DOL considers several factors, with no single factor being decisive. Let’s break down some key points:

  • Compensation: Was there a clear understanding that the internship was unpaid? Any promises of payment, even implied ones, could tip the scales towards the intern being an employee.
  • Educational Value: Does the internship offer training similar to what an educational program would provide? Hands-on learning experiences are a good sign.
  • School Ties: Is the internship linked to the intern’s academic program through coursework or credits? Does it accommodate their academic schedule?
  • Learning Duration: Is the internship a set period designed to provide valuable learning, not just cheap labor?
  • Complementary Work: Does the intern’s work enhance, rather than replace, the work of paid employees, while offering the intern significant educational benefits?
  • Job Expectations: Was it clear from the start that the internship doesn’t guarantee a future job offer?

If the intern gains the majority of the benefits, they’re considered the primary beneficiary and not entitled to FLSA protections. However, if the employer benefits more, the intern becomes an employee and must be paid according to FLSA guidelines.