By Mike LaSusa · February 4, 2021, 4:50 PM EST

The nation’s leading intern advocacy group is calling on President Joe Biden’s administration to develop stricter standards around unpaid internships, warning that the economic effects of the COVID-19 pandemic could exacerbate problems of worker misclassification.

The Washington, D.C.-based nonprofit Pay Our Interns sent a letter in December to Biden transition team member M. Patricia Smith — who is now senior counselor to the secretary of labor — urging the incoming leadership of the U.S. Department of Labor to ramp up enforcement against employers misclassifying workers as unpaid interns.

“Unpaid internships create a barrier for students with a low socioeconomic status, who are often people of color,” the group said. “By not providing interns the same or similar protections as other individuals in the workplace, including monetary compensation — which allows them to support themselves and their families through those learning experiences — we risk creating generations of Americans who lack the experience and the resources to be successful.”

Courts have grappled for years with the question of how interns should be classified for wage and hour purposes. In the past decade, several circuit courts have addressed the issue, particularly as it relates to a 1947 U.S. Supreme Court decision involving railroad worker trainees.

Carlos Vera, the co-founder and executive director of Pay Our Interns, told Law360 that the issue of intern misclassification has grown more pressing as the COVID-19 pandemic continues to cause economic hardship.

“This could very well be a repeat of 2008,” Vera said, referring to difficulties faced by early-career workers after the onset of the Great Recession. “People are desperate, and employers are going to take advantage of that.”

Pay Our Interns wants the DOL to start tracking data on unpaid internships and ramping up enforcement against misclassification, including by setting up an initiative targeting the nonprofit sector, which the advocacy group says is “rife with” wage and hour violations, including improper use of unpaid interns.

The group also wants the DOL to take another look at guidance the agency put out in 2018 during former President Donald Trump’s administration, which rescinded previous advice from 2010 and embraced a standard focusing on whether the intern or their employer is the “primary beneficiary” of the relationship.

That standard is based on a seven-factor test for determining interns’ status that was laid out by the Second Circuit in its 2015 ruling in Glatt v. Fox Searchlight Pictures Inc. and has since been adopted by other federal appeals courts. 

But the primary beneficiary test isn’t something Congress came up with, and neither is the DOL’s guidance, said Hugh Baran, a senior staff attorney at the National Employment Law Project, or NELP, a worker advocacy group.

“It’s not in the Fair Labor Standards Act. It’s a judge-made test,” he said. “It actually leaves both workers and employers as well in a very uncertain place where you really have to think carefully or think twice before you bring on an unpaid worker as an intern.”

The FLSA’s definition of employment is “extremely broad,” and Supreme Court precedent has outlined a classification test based on the “economic realities” of the relationship, Baran said, pointing out that this test hinges on the facts of each individual case.

“Even in Glatt, the emphasis is on the facts and the specificity of the economic reality,” he said.

Given the status quo, employers should create an internship agreement that spells out how the internship will fulfill the factors of the primary beneficiary test, said Nick Reiter, a partner at management-side firm Venable LLP.

Those factors include whether there’s a clear understanding that no expectation of compensation exists, whether interns receive training similar to what they’d get in an educational environment and to what extent the internship is tied to a formal education program, among others.

“It shouldn’t be that the intern is just showing up from 9 to 5 and putting their head down and toiling away,” Reiter said. “They should really be taking a hard look at how much of the internship are those menial tasks and how much of the internship is more substantive work.”

Reiter said employers bringing on unpaid interns should be particularly cautious considering the many minimum wage increases taking place this year in states across the country — and possibly at the federal level.

“If the minimum wage is raised, then the cost of getting this wrong can be a lot higher,” Reiter said.

Vera of Pay Our Interns expressed hope that the policy pendulum has begun to swing back in interns’ favor, a trend he expects to continue under the Biden administration and the Democratic-controlled Congress.

The Pay Our Interns director pointed to senior counselor Smith’s record of challenging unpaid internships, both as DOL solicitor from 2010 to 2017 and prior to that as a commissioner at the New York State Department of Labor.

“Even though there’s always been that movement, I don’t think you had people in those places of power like we have now,” Vera said.

NELP attorney Baran agreed, saying the Biden administration’s enforcement initiatives will likely extend beyond intern misclassification to other kinds of worker misclassification.

“They understand that it doesn’t matter what you call your workers,” Baran said. “You can’t just label your way out of liability under our nation’s wage and hour laws.”

The DOL did not respond to requests for comment. 

— Additional reporting by Vin Gurrieri. Editing by Abbie Sarfo.