Articles and Newsletters

Client Alert from the Labor and Employment Group - May 2010

Unpaid Internships: Are They Legal?

By Patricia F. Weisberg

The Department of Labor recently announced that it is cracking down on employers that do not pay interns or do not pay them properly. In an attempt to educate employers, the DOL issued a "Fact Sheet" discussing Internship Programs under the Fair Labor Standards Act. In addition, Nancy J. Leppink, the acting director of the DOL's Wage and Hour Division, is reported to have said that there are few "for-profit" employers who can offer unpaid internships and remain in compliance with the law.

There are several reasons this problem is just now being addressed. First, the DOL has an increased budget and commitment to enforcing the FLSA. Second, interns typically do not file complaints - either because they need the experience or because they don't want to risk endangering their chances for future employment.

THE DOL TEST

The DOL Fact Sheet provides information to help for-profit employers determine whether interns must be paid the minimum wage and overtime under the FLSA. The determination of whether an internship or training program is lawful under the FLSA depends upon all of the facts and circumstances of each such program.

The DOL says that the following six criteria must be applied when making this determination:

1. 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;
2. The internship experience is for the benefit of the intern;
3. The intern does not displace regular employees, but works under close supervision of existing staff;
4. 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;
5. The intern is not necessarily entitled to a job at the conclusion of the internship; and
6. The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

The DOL says that if all of the factors listed above are met, an employment relationship does not exist under the FLSA, and the intern does not have to be paid. This exclusion is very narrow. The DOL is really saying that, if your company benefits from the work which an intern performs, then the intern must be paid.

DOs AND DON'Ts

An internship program that is structured around a classroom or academic experience, as opposed to the employer's actual operations, is more likely to be viewed as an extension of the individual's educational experience (this often occurs where a college or university exercises oversight over the internship program and provides educational credit).

An internship program that provides the individual with skills that can be used in multiple employment settings, as opposed to skills particular to one employer's operation, will be more likely to be viewed as training.

The intern should not perform "routine work" of the business on a regular and recurring basis, and the business should not be dependent upon the work of the intern.

The interns should not replace or substitute for regular workers. If the employer would have otherwise hired additional workers but for the availability of the interns, the interns must be paid at least minimum wage. If, however, the employer is providing job shadowing opportunities that allow an intern to learn certain functions under the close and constant supervision of regular employees, and the intern performs no or minimal work, the activity is more likely to be viewed as a bona fide educational experience.

An internship is typically for a fixed duration. It should not be used as a "trial period." The DOL has said that if an intern is placed with the employer for an internship with the expectation that s/he will then be hired as an employee, the intern must be paid.

EXCEPTIONS FOR STATE OR LOCAL GOVERNMENTS AND CERTAIN NOT-FOR-PROFIT ORGANIZATIONS

There is an exception in the FLSA for some individuals who volunteer to perform services for a state or local government agency, or individuals who volunteer their time to non-profit organizations - freely and without anticipation of compensation - for religious, charitable, civic, or humanitarian purposes. The DOL is currently reviewing the need for additional guidance on internships in the public and non-profit sectors.

The information in this Client Alert is a summary of often complex legal issues and may not cover all of the "fine points" of a specific situation or court jurisdiction. Accordingly, it is not intended to be legal advice, which should always be obtained in consultation with an attorney. The lawyers in Walter & Haverfield's Labor and Employment Law Group will be pleased to assist with any questions about this new law.