Unpaid Internship 6 Factor Test

The Unpaid Internship 6 Factor Test

Am I an Intern/Trainee?

The seminal case addressing whether interns/trainees are employees entitled to the protections of the FLSA is Walling v. Portland Terminal Co., 330 U.S. 148 (1947). In Portland Terminal, a railroad company, gave prospective brakemen a practical course of training that typically lasted seven or eight days. The Supreme court found that the trainees did not displace any of the regular employees. Nor did their work expedite the railroad’s business. At times, it actually impeded its business because, in addition to their normal duties, the regular employees had to closely supervise the trainees. The trainees did not receive compensation during their 7-8 day training period other than a retroactive $4.00 per day allowance, contingent upon successful completion of the training.

The Supreme Court held that the trainees were not employees within the meaning of the FLSA, and therefore were not entitled to be paid minimum wage. It was from this Supreme Court analysis that the Department of Labor based it six-factor test.

The Department of Labor Six-Factor Test

After Portland Terminal, the U.S. Department of Labor – Wage and Hour Division identified six criteria in its Fact Sheet #71 to determine whether an intern/trainee is an “employee” for purposes of the FLSA. The Department of Labor’s longstanding position is that all six criteria must apply before the agency will consider that a trainee/intern is not an employee for purposes of the FLSA.

The six factors of the Department of Labor test are:

(1) the training, even though it includes actual operation of the facilities of the employer, is similar to that which would be given in a vocational school;

In general, the more an internship program is structured around a classroom or academic experience, as opposed to the employer’s actual operations, the more likely the internship will be viewed as an extension of the individuals educational experience (this often occurs where a college or university exercises oversight over the internship program and provides educational credit).  The more the internship provides the individual with skills that can be used in multiple employment settings, as opposed to skills particular to one employer’s operation, the more likely the intern would be viewed as receiving training.  Under these circumstances the intern does not perform the routine work of the business on a regular and recurring basis, and the business is not dependent upon the work of the intern.

So, for example, the student’s placement should be career oriented, and not in an occupation for which no lengthy observation or training is required, like in janitorial work, flipping hamburgers, or answering phones. Furthermore, vocational education also is based on progressive learning, which requires students to learn new things based on skills and knowledge learned previously. Trainees who repeatedly perform the same tasks as employees do, would be entitled to be paid for that time. Training that constitutes a very limited and narrow kind of learning (e.g. using employers unique filing system) does not rise to the level that one would receive in a “general vocational course.”

(2) the training is for the benefit of the trainees or students;

If the interns are engaged in the operations of the employer or are performing productive work (for example, filing, performing other clerical work, or assisting customers), then the fact that they may be receiving some benefits in the form of a new skill or improved work habits will not exclude them from the FLSA’s minimum wage and overtime requirements because the employer benefits from the interns’ work.

When an employer is able to provide its services at below-market rates, it receives a “greater advantage” from the participants’ work.

(3) the trainees or students do not displace regular employees, but work under their close observation;

If an employer uses interns as substitutes for regular workers or to augment its existing workforce during specific time periods, these interns must be paid at least minimum wage.  If an employer would have hired additional employees or required existing staff to work additional hours had the interns not performed the work, then the interns will be viewed as employees and entitled to compensation under the FLSA.

If the employer is providing job shadowing opportunities that allow an intern to learn certain functions under the close and constant supervision of regular employees, but the intern performs minimal work, the activity is more likely to be viewed as a bona fide educational experience. Conversely, if the intern receives the same level of supervision as the employer’s regular workforce, this would suggest an employment relationship, rather than training.

The relevant inquiry under this factor, however, is whether a students’ work actually eliminated the need for employees to work additional hours or the need to hire additional employees. The U.S. Department of Labor has stated that “the placement of the trainee at a work site during the learning experience must not result in the displacement of any regular employee — i.e., the presence of the trainee at the work site cannot result in an employee being laid off, cannot result in the employer not hiring an employee it would otherwise hire, and cannot result in an employee working fewer hours than he or she would otherwise work.

One Court held that the individuals in question were not trainees but employees under the FLSA, because the participants received direct supervision only for the first few days, thereafter, other than periodic short visits from shift or field supervisors once or twice each shift, they were left alone.

(4) the employer that provides the training derives no immediate advantage from the activities of the trainees or students; and on occasion his operations may actually be impeded;

When a trainee receives direct and ongoing supervision, any productive work performed by the trainee will be offset by the employer’s burden of training and supervising the trainee. When an intern works independently, and are counted on to contribute work on a daily basis to keep the institution operational, their productive work is not offset by the necessity to supervise them.

(5) the trainees or students are not necessarily entitled to a job at the conclusion of the training period; and

The internship should be of a fixed duration established prior to the outset of the internship.  Further, unpaid internships should not be used by the employer as a trial period for individuals seeking employment at the conclusion of the internship period.  If an intern is placed with the employer for a trial period with the expectation that he or she will then be hired on a permanent basis, that individual generally would be considered an employee under the FLSA.

When an employer cannot distinguish between unpaid interns and paid employees who were previously interns, and where sometimes interns came to work for the employer, an inference can be drawn that interns were performing the same working that they were seeking to get paid to perform after the internship was over.

(6) the employer and the trainees or students understand that the trainees or students are not entitled to wages for the time spent in training.

Any sort of compensation related to the amount of work performed should defeat any argument that the intern is a trainee.

Application of the DOL 6-factor test in the courts:

Courts have taken several different approaches with regard to the DOL’s six-factor test when distinguishing between employees and interns.  Some courts, have applied the test as strictly promulgated by the DOL, requiring that, unless all six criteria are met, an intern is an employee covered by the FLSA.  In such jurisdictions, if an internship program fails to meet any one criteria (if, for instance, the employer derives an immediate benefit from the activities of the intern), that intern would be a covered employee entitled to minimum wage.  Several courts have taken a “totality of the circumstances” approach to the test, looking at the presence or absence of any of the six criteria in totality.  Although slightly more forgiving than the “all or nothing” approach of the DOL, this approach is nonetheless still quite strict, and only allows unpaid internships that sufficiently meet the intent of the six-factor test, i.e., where unpaid interns are receiving a very educational experience (deriving educational benefit in the way one does in school, with hands-on training and supervision), and are not merely unpaid workers.   Still other courts have approached the DOL test as a “primary beneficiary” test, focusing largely on which party – the employer or the purported intern – receives the primary benefit of the work performed. By focusing on the benefits flowing to each party, the test seeks to capture the distinction the FLSA attempts to make between trainees and workers.