DOL Guidelines for Paying Interns in 2018 (and Beyond)

May 29, 2018
| Michael Altiero
Paid internships in 2018

The beginning of the summer months signals the start of summer vacations for most college students in the United States.

With academic semesters over, many students turn their focus to summer internships to help gain valuable experience in their field of study, as well as to meet certain school requirements, such as attaining credits.

Many students also look to internships as a way to earn an income while in college.

From 2010 to 2017, there was a significant drop in unpaid internships due to standards set by the Department of Labor (DOL). However, in January 2018, the DOL revised their criteria for paying interns, loosening the requirements that could make unpaid internships more popular for employers.

Let’s explore some background on internship pay, the old and new DOL criteria, and what they mean for employers looking to hire interns while remaining compliant.

FLSA, Interns, and the Old DOL Criteria

Before we get to the old and new criteria for whether someone is an “intern” or an “employee,” it is important to understand how the Fair Labor Standards Act (FLSA) factors into internships.

The FLSA is a federal law that requires employers to pay non-exempt employees at least the minimum wage as well as time-and-a-half if an employee works more than 40 hours in a week.

If a company’s interns are deemed to be employees, then they must be paid at least the minimum wage as they are subject to FLSA laws.

To determine whether an intern should fall under the FLSA (and be required to receive compensation for their services), the Department of Labor set up criteria that it used to make its determination.

From 2010 until the end of 2017, the DOL had 6 factors that had to be met in order for an employer to have unpaid internships.

Under this test, all six criteria had to be met in order for someone to be considered an “intern” and therefore be exempt from compensation. However, doing so was extremely difficult, meaning that unpaid internships were rare during this time.

However, as 2017 turned to 2018, new guidelines were issued that may lead to an increase in unpaid internship going forward.

The New DOL Criteria for Paying Interns

In January 2018, the Department of Labor updated their guidelines and criteria for offering unpaid internships.

The new rules say that internships should be analyzed on a case-by-case basis and that “no single factor is determinative.” Additionally, according to the DOL, “whether an intern or student is an employee under the FLSA necessarily depends on the unique circumstances of each case."

The new criteria (or primary beneficiary test) from the DOL to determine if a student or intern should be considered an employee are:
  • Both parties understand that the intern isn’t entitled to compensation
  • The internship provides training that would be given in an educational environment
  • Completion of the intern’s program entitles him or her to academic credit
  • The internship corresponds with the academic calendar
  • The duration of the internship is limited to the period when the internship educates the intern
  • The intern’s work complements rather than displaces the work of a paid employee while also providing significant educational benefits
  • Both the intern and the employer understand that the internship is conducted without entitlement to a paid job after the internship ends

Unlike the old six-factor test, where an employer had to satisfy each criteria in order for someone to be considered an “intern” and not receive compensation, the new test allows for more flexibility when making a determination.

The goal of these criteria is to identify the primary beneficiary in the relationship between a student or intern, and the employer. If an employer is deemed to be the primary beneficiary, interns should be treated as employees and earn at least the minimum wage as well as overtime compensation.

Will Unpaid Internships Become More Prominent with The New DOL Guidelines?

With the relaxed standards now in place for employers to hire interns and not provide them with compensation, some industry professionals are concerned that this will lead to a comeback for unpaid internships.

However, others don’t see it that way in large part because of the steps employers had to take with their internship programs under the old guidelines. There are also many benefits for employers who pay their interns.

It is important for employers moving forward to keep the revised guidelines in mind when hiring interns and ensure that their program is in compliance with all federal and state laws.

Doing so will prevent any fines, penalties, or potential lawsuits that could come from violating the FSLA.

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Co-Employment vs. Employee Leasing