By Ben Roach
The United States Department of Labor (DOL) has been off to a busy start in 2018. In early January, the DOL re-issued 17 previously withdrawn opinion letters addressing a range of topics under the Fair Labor Standards Act (FLSA). The DOL also announced that it was abandoning its prior test used to determine whether interns were “employees” required to be paid under the FLSA.
17 Opinion Letters Re-Issued
The re-issued opinion letters were all originally put in place in January 2009 during the final days of the Bush Administration. The Obama Administration withdrew these opinion letters in March 2009. On January 5, 2018, the 17 opinion letters were re-issued and re-numbered as FLSA2018-1 through FLSA2018-17. The opinion letters address a variety of inquiries concerning various topics under the FLSA and its implementing regulations. The opinion letters cover the following topics:
- salary deductions for exempt employees (FLSA2018-7 and FLSA 2018-14);
- whether certain bonuses or other payments should be used in calculating an employee’s “regular rate” for the purpose of determining overtime (FLSA2018-5, FLSA2018-9, and FLSA2018-11);
- joint employment and volunteer status (FLSA2018-16);
- whether a plumbing repair and service business qualifies as a retail or service establishment for an overtime exemption (FLSA2018-2);
- coaches and the teacher exemption (FLSA2018-6);
- ambulance personnel on-call time and hours worked (FLSA2018-1); and
- the exempt status of specific jobs in specific industries, such as civilian helicopter pilots (FLSA2018-3); client service managers of an insurance company (FLSA2018-8); residential construction project supervisors (FLSA2018-10 and FLSA2018-17); and consultants, clinical coordinators, and business development managers of a healthcare placement company (FLSA2018-12).
If you are in any of these industries or facing any of these specific issues, the opinion letters are worth reading. DOL opinion letters can be useful to provide guidance on how the FLSA will be interpreted in specific situations, and can often be useful guidance for employers in the same industry and addressing the same issues that arise in the letters. DOL opinion letters also serve as a qualifying written ruling for the purpose of the FLSA’s affirmative defense provision. In order for employers to be able to use reliance upon DOL opinion letters for an affirmative defense, it is important that employers ensure that they are acting in conformity with an opinion letter, and that the employer’s specific situation matches the facts of the opinion letter.
The DOL Changes the Test Used to Determine Whether Interns Must be Paid
Since 2010, the DOL has used its own six-factor test to determine whether interns are “employees” that must be paid in conformance with the minimum wage and overtime requirements of the FLSA. Several federal courts have refused to follow the DOL test. On January 5, 2018, the DOL officially stated that going forward it would follow the “primary beneficiary” test used by several federal appellate courts to determine whether interns are “employees” under the FLSA and must be paid.
Courts have preferred the “primary beneficiary” test based on three important features: (1) the test focuses on what the intern receives in exchange for his or her work; (2) the test provides flexibility in examining the economic reality between the intern and the employer (similar to other FLSA-based inquiries); and (3) the test acknowledges the distinction between intern-employer relationships, in which interns typically expect to receive educational or vocational benefits, and employee-employer relationships, in which employees do not necessarily expect to receive such benefits. See, e.g., Benjamin v. B&H Education, Inc., 877 F.3d 1139, 1146 (9th Cir. 2017).
Under the “primary beneficiary” test, the DOL will now look at seven non-exhaustive factors to weigh and balance in determining whether the intern is an “employee” who must be compensated consistent with the FLSA minimum wage and overtime requirements:
- 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.
- 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.
- The extent to which the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit.
- The extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic calendar.
- The extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning.
- 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.
- 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.
Id. at 1146.
If you are an employer who has unpaid interns it is a good idea to evaluate the relationship under this “primary beneficiary” test to make sure you are in compliance with the FLSA, especially if you have been relying upon the prior DOL guidance. The lawyers in Nyemaster Goode’s Labor and Employment Department are available to answer any questions you have about this situation.