Tuesday, May 3, 2011

6th Circuit tosses out DOL’s internship test

A little over a year ago, the Department of Labor signaled that it was placing unpaid internships and training programs in its crosshairs, via its publication of Fact Sheet #71 (entitled, Internship Programs Under The Fair Labor Standards Act). That Fact Sheet re-affirmed the DOL’s six-factored analysis for the legality of unpaid internships.

Solis v. Laurelbook Sanitarium and School, Inc. (6th Cir. 4/28/2011) concerned whether students who worked at a school-owned nursing home as part of their schooling were employees (who must be paid) or interns/trainees (who do not).

The 6th Circuit broke ranks from the Department of Labor and refused to apply its six-factored test to determine whether the school properly classified these student workers:

We find the WHD’s [six-factored] test to be a poor method for determining employee status in a training or educational setting. For starters, it is overly rigid and inconsistent with a totality-of-the-circumstances approach, where no one factor (or the absence of one factor) controls….

[W]e hold that the proper approach for determining whether an employment relationship exists in the context of a training or learning situation is to ascertain which party derives the primary benefit from the relationship. Factors such as whether the relationship displaces paid employees and whether there is educational value derived from the relationship are relevant considerations that can guide the inquiry.

The court concluded that even though Laurelbrook obtained some benefit from the students' activities, the primary benefit of the program ran to the students. Therefore, the school properly categorized them as unpaid interns or trainees.

Notwithstanding this seemingly pro-business decision, internships continue to be a touchy wage and hour issue. Employers should be mindful of all of these principles, and tread very carefully if debating the use of unpaid interns, volunteers, or trainees.