Trump makes it easier to not pay interns

New rules still subjective, but far more flexible

The Trump administration just made it a lot easier for for-profit employers to legally benefit from the work of interns and not have to pay them, according to new rules released recently by the US Department of Labor.

This comes after several legal challenges were filed against the previous set of six rules adopted by the Obama administration that greatly favored paying interns.  Even if just one of the six rules was not met, the intern was classified as an employee and was entitled to the minimum wage under the Fair Labor Standards Act. One of the rules said: “The employer that provides the training should derive no immediate advantage from the activities of the intern.”

Paul DeCamp, a Washington, DC, employment lawyer and a former administrator of the Labor Department’s wage and hour division, said the new rules provide a lot more leeway.

“The original standards as written were ridiculous if you tried to apply them literally,” he said. “The new rules are more flexible.”

Under the new rules, whether an intern must be paid or not is based on who the “primary beneficiary” of the relationship is – the intern or the employer.

If the internship is primarily for the economic benefit of the employer, then the intern is considered to be an employee and must therefore be paid both the minimum wage and any overtime.  If, on the other hand, the internship is primarily for the educational benefit of the intern, then the intern is not considered to be an employee and thus does not have to be paid at all.

“The new DOL guidelines are basically a cut-and-paste adoption of recent, very pro-employer federal court rulings,” said David Yamada, a professor of law and director of the New Workplace Institute at Suffolk University Law School, “The factors are heavily weighted toward employers.”

Yamada also questioned the reasoning of the primary beneficiary test.  “It illogically assumes an unknown result,” Yamada says.  “How does an intern employer know whether the intern or the employer was the primary beneficiary of an internship until after the internship was concluded and the intern’s work contributions are assessed?”

The Labor Department uses seven non-exhaustive factors identified by the courts as part of the primary beneficiary test.  No single factor is determinative and the list is not exhaustive.

The factors include the extent to which the internship provides training that would be similar to what would be provided at an educational institution, the intern’s work complements rather than displaces the work of paid employees, and the intern and the employer clearly understand that there is no expectation of compensation.

In his 2011 book, Intern Nation, Ross Perlin estimated that there are 1 to 2 million Americans working annually as interns, with as many as 50 percent either unpaid or earning less than minimum wage.

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“It is virtually indisputable fact that having an internship or co-op — especially a paid position — improves a student’s chances of receiving a job offer prior to graduation,” according to a 2015 study by the National Association of Colleges and Employers.

The study also found that almost three out of four students who had paid internships in the private sector got job offers before graduation compared to just over 40 percent of their unpaid counterparts.  The median starting salaries after graduation also significantly favored the interns/co-ops who were paid, ranging from roughly $40,000 to $50,000 for those who were paid to $30,000 to $40,000 for their unpaid counterparts.

It is not clear what the impact of the new rules will be on Massachusetts’ minimum wage law.   It may “depend on whether Massachusetts decides to fully adopt them in its interpretations of its own labor standards statutes and regulations,” Yamata said.  “This will be an item to watch for in the future.”