In light of a sluggish job market with an increase in internships, the Department of Labor has initiated a crackdown on unpaid internships at for-profit companies. “If you’re a for-profit employer or you want to pursue an internship with a for-profit employer, there aren’t going to be many circumstances where you can have an internship and not be paid and still be in compliance with the law,” said Nancy J. Leppink, the acting director of the Department of Labor’s Wage and Hour division in a recent interview with the New York Times. Just weeks after the DOL announced their new campaign in the New York Times article, the Department of Labor released “Fact Sheet #71: Internship Programs Under the Fair Labor Standards Act.”
The DOL takes the position that the term “employ” is broadly defined as to “suffer or permit to work” so that many for-profit internships will require compensation. However, the Supreme Court has held that the term “suffer or permit to work” cannot be construed to mean that an individual who serves only his or her own interest is “employed” just because another provides aid or instruction. With these principles in mind, the DOL has issued a six-part test to guide the determination of whether interns must be paid the minimum wage and overtime under the Fair Labor Standards Act (“FLSA”) for the services they provide to “for-profit” private sector employers. While the DOL’s test may subject to legal challenge, it is advisable to take the test into consideration when implementing internship programs at your company.
Under the DOL’s test, the following six criteria must be applied to the facts and circumstances of each internship program:
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. The more the internship experience focuses on an academic experience as opposed to the employer’s particular operations, the more likely the DOL will view the internship as properly unpaid (i.e., school has oversight and school gives class credit for the program);
2. The internship experience is for the benefit of the intern. The internship should provide the individual with generic work experience, rather than skills particular to one employer’s operation;
3. The intern does not displace regular employees, but works under close supervision of existing staff. If the employer would have hired additional employees to fill that job position or the intern substitutes for a regular employee, the intern may be entitled to compensation under the FLSA;
4. The employer that provides the training derives no immediate advantage from the activities of the inter; 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. The internship should not be a trial period for individuals seeking employment at the end 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 all of the factors are satisfied, an employment relationship does not exist under the FLSA. The DOL, however, does not indicate how the factors will be assessed if they are not all satisfied.
With the summer season for unpaid internships fast-approaching, now is the time to assess your company’s compliance with the FLSA.
For more information, or assistance with FLSA compliance, please contact Odin, Feldman & Pittleman’s Labor and Employment Group.
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