This month, Jon Vegosen briefs us on important developments regarding interns.

Intern Crackdown

In this challenging economy, more people are accepting unpaid internships in order to obtain experience and build their resumes.  But many employers do not pay interns or they pay interns inadequately when they “employ” them (i.e., they suffer or permit them to work).  The U.S. Department of Labor (DOL) has advised that it will be cracking down on employers that fail to pay interns appropriately. 

It has also issued a Fact Sheet (#71) outlining “whether interns must be paid the minimum wage and overtime under the Fair Labor Standards Act for the services that they provide to ‘for-profit’ private sector employers.”  In addition, a number of states are cracking down on abusive intern practices.

According to the DOL, there are situations when individuals participating in “for-profit” private sector internships or training programs need not be compensated.  The United States Supreme Court has held that the term “suffer or permit to work” cannot be interpreted to make a person whose work serves only his or her own interest an employee of another who provides aid or instruction. 

According to the Fact Sheet, this “may apply to interns who receive training for their own educational benefit if the training meets certain criteria.”  Of course, whether a particular internship or training program comports with the exclusion is contingent upon an assessment of all of its facts and circumstances.  The DOL Fact Sheet notes 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.

If all of the foregoing factors are met, an employment relationship will not exist under the Fair Labor Standards Act, and its minimum wage and overtime provisions will not apply to the intern.  As the Fact Sheet points out, “this exclusion from the definition of employment is necessarily quite narrow because the FLSA’s definition of ‘employ’ is very broad.”

Before an employer brings on an intern and decides not to pay the individual, it would be wise to consult with legal counsel to make sure that it is not running afoul of either federal or state minimum wage and overtime laws.

Jon Vegosen is a founding member of Funkhouser Vegosen Liebman & Dunn Ltd. and has more than 33 years experience practicing law.  He is nationally recognized for his work in labor and employment relations and is sought after as an author and spokesperson on labor and employment issues.

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