DOL adopts Primary Beneficiary test for interns under FLSA

The U.S. Department of Labor has adopted the Primary Beneficiary test for deciding whether an intern must be paid as an employee or can be treated instead as an unpaid intern. This brings the DOL into alignment with a number of circuit courts, including the Sixth, Ninth and Eleventh. The Primary Beneficiary test is generally seen as more favorable towards employers and students who wish to be treated as unpaid interns.

The Primary Beneficiary test asks, given the “economic reality” of the relationship, whether the putative intern or the company is the real “primary beneficiary” of the relationship. When asking that question, the DOL and courts that follow this test consider the following seven factors (quoting new DOL Fact Sheet #71):

  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.

Colorado minimum wage increase effective 1/1/18 to $10.20/$7.18

Effective 1/1/18, Colorado increased its minimum wage to $10.20 or, for tipped employees, $7.18.

Source: Colorado Department of Labor Minimum Wage web page.

DOL proposes reversing course on Obama-era tip-pooling rule

The U.S. Department of Labor has issued a proposed rule that would reverse an Obama-era tip-pooling rule, which has proven controversial since its issuance. As previously reported in this blog, the courts have split over whether — and the Tenth Circuit has joined the majority that hold that — employers need not comply with the tip-pooling rule if they otherwise meet the Fair Labor Standards Act’s minimum wage requirements. These courts hold that the tip-pooling rule is merely a condition of claiming the credit for tips against the minimum wage; if an employer does not claim the tip credit — if the employer pays at or above the minimum wage — then the tip-pooling rule does not apply. One part of the tip-pooling rule prohibits employers from sharing tips with any worker in a position that is not customarily and regularly tipped, such as dishwashers, cooks, etc. Thus, by paying tipped employees (e.g., waiters) at or above the minimum wage, without claiming the tip credit, employers are free to require a tip pool that is shared with other employees, even dishwashers, cooks, etc. This proposed rule would confirm this view in the formal FLSA regulations, in other words, that the tip-pooling rule only applies as a condition of claiming the tip credit. The proposed rule would codify the approach already taken by the Tenth Circuit.