CPA Practice Advisor - 19
A YEAR IN THE LIFE: PAYROLL ACCOUNTANT
Think Twice Before Not Paying
By Lisa Fagan
SUMMER IS RAPIDLY approaching. Many
employers hire interns during the summer
to help out around the office. Interns can gain
valuable work experience to include on their
resumes - but some employers do not intend
to pay them. This could be a costly mistake if
the unpaid interns are entitled to pay under
either federal or state wage and hour laws.
Employers who are considering offering an unpaid
internship program should take a look at case law and federal and state rules before doing so. In 2010, the DOL's Wage
and Hour Division (WHD) issued a fact sheet (https://bit.
ly/1sayFho) to help employers determine whether interns
must be paid minimum wage and overtime. The guidance
outlined a six-factor test for making this determination:
■ The internship, even though it includes actual operation of
the facilities of the employer, is similar to training which
would be given in an educational environment.
■ The internship experience is for the benefit of the intern.
■ The intern does not displace regular employees, but works
under the close supervision of the existing staff.
■ The employer that provides the training derives no
immediate advantage from the activities of the intern and,
on occasion, its operations may actually be impeded.
■ The intern is not necessarily entitled to a job at the conclusion of the internship.
■ The employer and the intern understand that the intern is
not entitled to wages for the time spent in the internship.
PRIMARY BENEFICIARY TEST
The tide began to turn against the six-factor test and
towards a test that examined who was the primary
beneficiary of the internship relationship with the U.S.
Court of Appeals for the Second Circuit's opinion in Glatt
v. Spotlight Searchlight Pictures, Inc. in 2015. In that case,
involving interns at a movie production company, the
court declined to follow DOL Fact Sheet #71 to determine
whether the interns should have been paid. It pointed out
that the fact sheet is based on a 67-year-old federal case on
unpaid railroad brakemen trainees that didn't apply to all
workplaces. For example, the interns in Glatt, unlike the
brakemen, were enrolled in or had recently completed a
formal course of post-secondary education.
Instead, the Glatt court enumerated a list of factors
that put more reliance on who is the primary beneficiary
in the relationship. This new test said that the court should
look at factors such as the extent to which:
■ The intern and employer understand that there is no
expectation of compensation (which can support a finding
that the intern is an employee);
■ The internship provides training that would be similar to
that which would be given in an educational environment;
■ The internship is tied to the intern's formal education program
by integrated coursework or the receipt of academic credit;
■ The internship accommodates the intern's academic
commitments by corresponding to the academic calendar;
■ The internship's duration is limited to the period in which
the internship provides the intern with beneficial learning;
■ The intern's work complements, rather than displaces,
the work of paid employees while providing significant
educational benefits to the intern; and
■ The intern and the employer understand that the internship is conducted without entitlement to a paid job at the
conclusion of the internship.
Additionally, the court added that no one factor was
dispositive, and that the list was not exhaustive. Courts
should consider any relevant evidence that goes beyond
More court decisions followed that adopted the "primary
beneficiary test," including Mark v. Gawker Media, LLC, DC
NY, (2016); Schumann v. Collier Anesthesia, P.A., CA 11,
(2015); and Benjamin v. B&H Education, Inc., CA 9, (2017).
DOL ADOPTS PRIMARY BENEFICIARY TEST
The DOL subsequently issued a revised Fact Sheet #71:
Internship Programs Under the Fair Labor Standards Act
(https://bit.ly/1sayFho), in 2018. The revised Fact Sheet
adopts the factors set forth in the Glatt decision. The Fact
Sheet explains that if analysis of these circumstances
reveals that an intern or student is actually an employee,
then he or she is entitled to both minimum wage and overtime pay under the FLSA. On the other hand, if the analysis
confirms that the intern or student is not an employee,
then he or she is not entitled to either minimum wage or
overtime pay under the FLSA.
The bottom line is that any internship applications or
job offer letters should specifically state whether or not it
is an unpaid internship and if the intern is entitled to a
job at the end of the internship. The application and job
offer letters should be different from those provided to
regular employees. ■
Lisa Fagan is Editor of Tax Products for Thomson Reuters. This
article first appeared on the Thomson Reuters blog:
JUNE 2019 ■
CPA Practice Advisor
Table of Contents for the Digital Edition of CPA Practice Advisor
2019 Most Powerful Women in Accounting
2019 Product Review - Tax Preparation Systems
From the Editor: Change is in the Air
The Millennial Advisor: Gone!?!
The 21st Century Accountant: The Four Stages of Robotic Process Automation
From the Trenches: Do Your Best Leadership
The Leadership Advisor: How to Adapt Our Habits to Create Stronger Connections at Work
The Staffing & HR Advisor: How to Quit Your Job Gracefully
Lean Six Sigma Advisor: 4 Steps to Ensure a Return on Your Technology Investment
Bridging the Gap: Automation is Here. How Are You Leveraging It?
Protect & Build Wealth Through Captive Insurance
How Simplification Has Complicated the Tax Office of the Future
Apps We Love: Legal Services
Can Employers Make Direct Deposit Mandatory?
Think Twice Before Not Paying Summer Interns
How to Gain Law Firm Clients With Clever Marketing
How to Set Up the Chart of Accounts for Law Firm Clients
Resources for the Law Firm Accountant
The ProAdvisor Spotlight: Next Day Funding for ACH: Powerful Payment Processing that Drives Prosperity
Don't Delay Implementing New Revenue Recognition Standard
How to Prepare for Summer and Not Leave Your Business Stranded
CPA Practice Advisor - 1
CPA Practice Advisor - 2
CPA Practice Advisor - 3
CPA Practice Advisor - From the Editor: Change is in the Air
CPA Practice Advisor - 5
CPA Practice Advisor - 2019 Most Powerful Women in Accounting
CPA Practice Advisor - 7
CPA Practice Advisor - Protect & Build Wealth Through Captive Insurance
CPA Practice Advisor - 9
CPA Practice Advisor - 2019 Product Review - Tax Preparation Systems
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CPA Practice Advisor - 12
CPA Practice Advisor - 13
CPA Practice Advisor - 14
CPA Practice Advisor - 15
CPA Practice Advisor - 16
CPA Practice Advisor - How Simplification Has Complicated the Tax Office of the Future
CPA Practice Advisor - Can Employers Make Direct Deposit Mandatory?
CPA Practice Advisor - Think Twice Before Not Paying Summer Interns
CPA Practice Advisor - Resources for the Law Firm Accountant
CPA Practice Advisor - 21
CPA Practice Advisor - Apps We Love: Legal Services
CPA Practice Advisor - The Millennial Advisor: Gone!?!
CPA Practice Advisor - The 21st Century Accountant: The Four Stages of Robotic Process Automation
CPA Practice Advisor - The ProAdvisor Spotlight: Next Day Funding for ACH: Powerful Payment Processing that Drives Prosperity
CPA Practice Advisor - From the Trenches: Do Your Best Leadership
CPA Practice Advisor - 27
CPA Practice Advisor - The Leadership Advisor: How to Adapt Our Habits to Create Stronger Connections at Work
CPA Practice Advisor - The Staffing & HR Advisor: How to Quit Your Job Gracefully
CPA Practice Advisor - Don't Delay Implementing New Revenue Recognition Standard
CPA Practice Advisor - AICPA News
CPA Practice Advisor - Lean Six Sigma Advisor: 4 Steps to Ensure a Return on Your Technology Investment
CPA Practice Advisor - How to Prepare for Summer and Not Leave Your Business Stranded
CPA Practice Advisor - Bridging the Gap: Automation is Here. How Are You Leveraging It?
CPA Practice Advisor - 35
CPA Practice Advisor - 36