School's Out, Summer's Here…But Before You Bring On A Summer Intern, Let's Take One More Test: The "Primary Beneficiary" Test
Posted May 11, 2018

Alice Cooper’s 1972 hit “School’s Out” blasts on your car radio. It’s only May, but the temperature gauge on your dash says it’s 85 degrees outside; summer is practically here. You think to yourself, “In a few more weeks, students near and far will be hitting the streets looking for unpaid internship positions. Maybe this year, instead of temp workers, I’ll bring on a few interns….”

At first blush, summer internship programs appear to be a win-win – the student gets a real-life learning experience, and the business gets free labor. Before hiring that starry-eyed intern willing to work without pay, however, be sure to take your own final exam – the Department of Labor’s (DOL) new “Primary Beneficiary” Test.

In early January 2018, the DOL responded to several Circuit Court decisions (including our very own 9th Circuit Court’s decision in Benjamin v. B & H Educ., Inc. – December 2017), rejecting the DOL’s then-existing (and very rigid) 6-part intern test in favor of a more flexible standard called the “primary beneficiary test.” At its core, the new test focuses on who benefits most from the internship relationship - the business or the intern -- allowing us to truly examine the “economic realities” existing between the parties. Here are the factors:

1. “The extent to which the intern and the employer clearly understand that there is no expectation of compensation. Any promise of compensation, express or implied, suggests that the intern is an employee - and vice versa.
2. The extent to which the internship provides training that would be similar to that which would be given in an educational environment, including the clinical and other hands-on training provided by educational institutions.
3. The extent to which the internship is tied to the intern's formal education program by integrated coursework or the receipt of academic credit.
4. The extent to which the internship accommodates the intern's academic commitments by corresponding to the academic calendar.
5. The extent to which the internship's duration is limited to the period in which the internship provides the intern with beneficial learning.
6. The extent to which the intern's work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern.
7. The extent to which the intern and the employer understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship.”

No single factor in this new test is dispositive of the question whether your worker is an employee or intern. The Courts have noted that other factors might be relevant, depending on the circumstances of each individual internship situation. That said, although no single factor is 100% dispositive, common sense dictates that the more factors that are present and which benefit the intern, the more likely a true internship would be found to have existed, should you later be forced to prove true intern status in a civil litigation or in front of an administrative agency’s scrutiny.

So, before you hire that intern, take the test. If, after balancing the scales, a business determines that the worker will be doing more productive work (rather than non-productive learning), then treat that individual like an employee. Err on the side of caution. If you are unsure at all about the proper status, it is usually the simplest and safest approach just to make the individual a temporary employee (not eligible for benefits other than sick leave), pay minimum wage and limit that individual’s hours, all while still promoting learning. We often advise, half-jokingly, that a true intern in a true internship setting should be an impediment to your business productivity rather than a benefit (since they are mostly shadowing and, when they do work, they often botch things while gaining experience).

LightGabler is an employment defense firm working with employers and management to advise on employment issues and proactively prevent litigation, and it has a number of employment attorneys dedicated to providing wage and hour advice to a broad range of clients in numerous industries. LightGabler’s litigation attorneys also provide aggressive legal defense to employee claims when necessary. If you have any questions regarding internships or any other employee issue, please call LightGabler at 805-248-7208.

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