Many people in Texas have worked as interns, whether over summer vacation from school, after graduation or as way to get offered a full-time job. However, there have been significant questions about proper differentiation between interns and employees, especially when interns receive no pay or just a stipend that falls below minimum wage. There has been a change in the Department of Labor’s test to assess the correct classification of interns. It now aligns with the majority of U.S. appellate courts.
If an intern is deemed to be misclassified while doing the job of an employee, that person is entitled to receive pay of at least minimum wage, including overtime pay. The test that has been adopted by the Department of Labor is known as the “primary beneficiary” test. As implied in the name, this test looks at a series of factors to determine whether the employer or the intern gains a more substantial benefit from the relationship.
During the Obama administration, the Labor Department used a stricter standard that held that an employer could obtain no immediate advantage from hiring an intern. However, this standard was rejected by multiple federal courts. There are seven factors that help to assess the situation under the primary beneficiary test, including understandings around compensation, types of training provided, connection to formal education, accommodation of academic schedules, time limitations of the program and expectations of later work. It also looks at how the intern’s work relates to that of paid employees.
Misclassification of interns can be a substantial violation of wage and hour laws and the Fair Labor Standards Act, especially when unpaid interns are regularly used to replace paid employees’ labor. People who are concerned about this type of misclassification in their workplace can consult with a lawyer about the potential to take action and hold an employer accountable.