Are Unpaid Internships Legal in Kentucky?

A constant worry in the workplace is how much money you will be receiving at the end of the day for your hard-earned paycheck. While this decision is mostly left to the employer’s discretion, there are some laws that help regulate and govern how much employees must be paid at a minimum. One of these laws is the Fair Labor Standards Act (FLSA) which mandates things such as minimum wage. Of course for the Act to be implicated, your employer must be covered under the Act and you must be considered an employee under the FLSA.

Student Interns

One area that has been discussed greatly, therefore, is whether unpaid internships are covered under the FLSA and thus entitled to minimum wage. To help with this determination, the Department of Labor has announced a new test to be used to find if a worker is considered an unpaid intern or an employee under the FLSA.

To begin with, generally speaking “[t]he FLSA requires “for-profit” employers to pay employees for their work.”1)Fact Sheet #71: Internship Programs Under The Fair Labor Standards Act, U.S. Dept. of Labor (Jan. 2018), https://www.dol.gov/whd/regs/compliance/whdfs71.htm. However, under the Act interns and students working for such employers “may not be “employees” under the FLSA—in which case the FLSA does not require compensation for their work.”2)Id. Previously the Department of Labor used a six-factor test to determine if interns were able to be compensated for their work, under which the intern would be forced to satisfy all six factors in order to be protected under the FLSA.3)Jeffrey Landes, et al., U.S. DOL Follows Circuit Courts, Adopting “Primary Beneficiary” Test to Determine Whether Unpaid Interns Are Employees, National Law Review (Jan. 18, 2018), https://www.natlawreview.com/article/us-dol-follows-circuit-courts-adopting-primary-beneficiary-test-to-determine-whether. However, many federal courts opposed this test as being too rigid and instead adopted a “primary beneficiary test.”4)Id. Under this test, the courts examined the “economic reality” of the intern-employer relationship to determine which party is the “primary beneficiary” of the relationship.”5)Fact Sheet, supra note 1. Further, unlike the previous test, no single factor is dispositive or absolutely necessary to find that the intern is entitled to minimum wage and overtime, making the test more flexible and fact-specific.6)Denny Major, Are Unpaid Interns Employees Under the FLSA?, Haynsworth Sinkler Boyd (Jan. 10, 2018), https://www.scemployersblog.com/2018/01/are-unpaid-interns-employees/ 

Because of this finding by the courts, on January 5th, 2018 the Department of Labor has now changed the test to the primary beneficiary test to determine whether or not an unpaid intern is entitled to minimum wage and overtime under the FLSA. Under the primary beneficiary test, the Department of Labor will now consider the following seven factors as part of their determination:

  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 unpaid 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 unpaid 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 unpaid 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.

Each of these factors will be examined in this analysis, but as the Department of Labor points out “whether an intern or student is an employee under the FLSA necessarily depends on the unique circumstances of each case.”7)Fact Sheet, supra note 1. While this announcement by the Department of Labor is persuasive authority and thus not completely binding on the courts, this does illustrate a move by the Department to conform to the courts’ analysis of this issue.

With this new announcement however, if you are a student or intern you may now be entitled to some form of compensation for your work. If that is the case, you should seek legal counsel immediately to discuss your possible courses of action. 

References   [ + ]

1. Fact Sheet #71: Internship Programs Under The Fair Labor Standards Act, U.S. Dept. of Labor (Jan. 2018), https://www.dol.gov/whd/regs/compliance/whdfs71.htm.
2, 4. Id.
3. Jeffrey Landes, et al., U.S. DOL Follows Circuit Courts, Adopting “Primary Beneficiary” Test to Determine Whether Unpaid Interns Are Employees, National Law Review (Jan. 18, 2018), https://www.natlawreview.com/article/us-dol-follows-circuit-courts-adopting-primary-beneficiary-test-to-determine-whether.
5. Fact Sheet, supra note 1.
6. Denny Major, Are Unpaid Interns Employees Under the FLSA?, Haynsworth Sinkler Boyd (Jan. 10, 2018), https://www.scemployersblog.com/2018/01/are-unpaid-interns-employees/
7. Fact Sheet, supra note 1.
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