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What business owners need to know about unpaid internships - II

Last time, we discussed how with summer finally here, many college students will be seeking to secure paid or unpaid internships in order to gain some much-need experience in a field of interest.

We also discussed how even though unpaid internships are an understandably enticing proposition for employers, it's important for them to proceed with caution, as they could  open themselves up to potential liability should a court later decide that the position did not fit the necessary parameters. 

While we established how the U.S. Department of Labor defines an unpaid internship in our last post, it's worth noting that some courts have actually moved away from this six-factor test owing to what is viewed as its outdated, unrealistic and otherwise intractable approach.  

Specifically, the U.S. Circuit Courts of Appeals for 2nd and 11th districts have adopted what is known as the "primary beneficiary test," which unlike the fourth prong of the DOL's six-factor test, provides that employers can indeed derive some benefits provided the unpaid intern nevertheless remains the primary beneficiary of the program.  

Under the primary beneficiary test, an unpaid internship must satisfy at least some of the following factors:

  • There is an understanding between the employer and intern that there will be no expectations of compensation during the internship or a guaranteed job afterward.
  • The training provided in the internship is akin to that provided in an educational setting.
  • The internship is somehow linked to the intern's formal education, perhaps via academic credit or integrated coursework.
  • The internship is aligned with the academic calendar.
  • The intern is provided with significant education benefits and their work merely complements that provided by paid employees.

It's important to understand that the jurisdiction of the 11th circuit extends to Florida, Alabama and Georgia, while the jurisdiction of the 2nd circuit extends to New York, Connecticut and Vermont. In other words, the DOL's six-factor test is still controlling in the majority of the states, including Tennessee.

We'll conclude this discussion next time, examining some tips for what those employers eager to pursue an unpaid internship program can do to try to protect their interests.

If you are a business owner with questions or concerns relating to an employment law matter, consider speaking with a skilled legal professional.

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