Free Bird! Dep’t of Labor Rewrites Test for Unpaid Internships

chicks-2965846_1920Lots of things are free in the world of music. There’s Free Bird (Lynyrd Skynyrd), Free Money (Patti Smith), and according to Dire Straits, you can get your money for nothin’ and your chicks for free.

For the most part, though, you’ve got to pay for your interns. Or do you?

On Friday, the DOL announced it was reversing its 2010 guidance on Internship Programs under the Fair Labor Standards Act. Since 2010, the DOL had been taking the position that unpaid interns are employees and must be paid unless each of six factors were present. Here’s the old DOL fact sheet and six-factor test.

The DOL has now changed course, after four U.S. Court of Appeals decisions rejected the DOL’s test as too strict. The DOL now opted for a balancing test. The balancing test asks whether the intern or the business is the “primary beneficiary” of the internship.

The DOL’s new guidance adopts the same balancing test recently favored by the courts.

According to the new guidance, these seven factors should now be considered when determining if an internship can be unpaid:

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 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 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 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.

The test is a flexible test, like silly putty, and no single factor is determinative.

If the facts weigh in favor of the intern being an employee, the intern must receive a minimum wage and overtime.

If the facts weigh in favor of the internship being unpaid, the business must require the intern to play air guitar and sing either I’m Free (The Who) or I Feel Free (Cream). That’s right there in the new DOL guidance. Or it would be if I wrote it. Which is why I am not in charge.

For more information on independent contractor issues and other labor and employment developments to watch in 2018, join me in New York on Jan. 30, Los Angeles on Feb. 28, or Cincinnati on March 28 for the 2018 BakerHostetler Master Class on Labor Relations and Employment Law: A Time for Change. Attendance is complimentary, but advance registration is required. Please email me if you plan to attend, tlebowitz@bakerlaw.com, and list my name in your RSVP so I can be sure to look for you.

© 2018 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

Enter your email address to follow this blog and receive notifications of new posts by email.

Court Rules That Shadowing Dad at Work Might Require Payment

Shadow - Trainee or Employee  death-2577486_1280In the 1930s, the popular radio program The Shadow featured an invisible avenger who possessed “the mysterious power to cloud men’s minds, so they could not see him.” (He supposedly picked up this power in East Asia, which must have seemed mysterious in an era before Kung Pao Chicken was widely available.)

Eighty years later, “shadowing” has a different meaning. An unpaid trainee follows around a more experienced employee as a way to learn the business. Few trainees have mastered the power of invisibility [Note: only the best ones have, and they’re hard to find … ba-dum-bum], and often the nature of being a trainee involves getting in the way of the real work.

Scott Axel was a trainee who shadowed his father at an automobile wholesaler in Florida. He had no expectation of pay, and the business said it would not hire him. As a favor to his dad, the business let him learn the business by shadowing his dad.

Returning the favor, Scott then sued the wholesaler, claiming it failed to pay him minimum wage.

Dumb claim, right? Loser! (The claim, I mean, ahem.)

Anyway, a federal court of appeals was not so sure and ruled that it was a close call whether he was an employee or an unpaid trainee. Scott, apparently, had the mysterious power to cloud judges’ minds.

For much of the time, Scott just did work that his dad was doing, under his dad’s supervision. If that was all he did, though, the case probably would have been tossed out.

The company’s mistake was allowing Scott to do some wholesaling work that his father did not do, which arguably displaced a worker who would have performed the work if it were not for our hero. Scott posted vehicles on eBay and Craigslist, working under the direction of others, and he received a disciplinary warning for spending too much money on the listings. Scott testified that he spent more time on these tasks than on shadowing his dad.

The Appeals Court evaluated the case using a test for whether an unpaid trainee should be paid. The test is meant for educational internships and did not neatly fit the circumstances, so the court admittedly struggled with the analysis.

Ultimately, the Court decided it needed more information about how much time Scott spent performing the various tasks. The case was sent back to the lower court.

The lesson here for businesses who allow shadowing is to remember what a shadow is.  A shadow follows someone around.  A shadow does not do independent, productive work. (Except here.)

While there were several factors in this case that supported Scott being an unpaid trainee, too much gray area remained.

So what happens next?  The lower court might allow further briefing or might send the case to trial. Did the business do anything wrong? The ultimate question brings to mind the introduction from the radio program of long ago: “Who knows what evil lurks in the hearts of men? The Shadow knows!

© 2017 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

Enter your email address to follow this blog and receive notifications of new posts by email.