A long-standing practice among “for profit” private employers has been the use of unpaid student interns as a means of providing real-life experience as they advance their education. Such internships, which commonly bring the students into the employer’s workplace and operations, can quickly run afoul of the Fair Labor Standards Act (“FLSA”), the federal statute governing the payment of minimum wage and overtime, should the relationship become a benefit to the employer, rather than to the intern.
Under a rather broad statutory and regulatory scheme, the FLSA requires that non-exempt individuals who are “suffered or permitted to work” be paid for the services they perform. The Wage and Hour Division of the U.S. Department of Labor (“DOL”) takes the position that interns working in the for-profit, private sector must be paid as employees unless the internship meets the following test:
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.
If the relationship fails to satisfy any of theses tests, the intern must be treated as an employee and paid at least the minimum wage and any overtime they might work.
Not only has the DOL become more aggressive with investigating the validity of unpaid internship programs, there has also been a rise in the number of lawsuits (including collective action lawsuits) brought by interns who claim they should have been paid for their work. In a case recently filed in a Texas federal court, a group of unpaid interns have claimed that their activities were virtually identical to the work of paid employees, and that the internship was nothing more than an “extended audition” for future employment. If the FLSA claims succeed, the interns would be entitled to receive up to two times the amount of unpaid back pay and overtime, benefits, and fines and penalties under state or federal law.
Employers who offer (or plan to offer) unpaid internship opportunities should review their program and practices with the guidance of legal counsel. Doing so will provide greater assurance that the purpose and substance of the program satisfies the six DOL exemption criteria, and thus, reduce the risk of DOL investigations and wage and hour lawsuits.
For further information regarding FLSA requirements for unpaid internship programs, please contact Sandro DiMercurio at email@example.com or a member of Berry Moorman’s Labor & Employment Law Group.