Employers Should Review Internship Programs for Legal Compliance

With summer finally around the corner, employers who utilize interns should review their internship programs to ensure compliance with applicable wage and hour laws. The analysis is fact dependent and should entail close review of the six-factor test outlined by the Department of Labor.  

 The Department of Labor’s Six-Factor Test

 The U.S. Department of Labor (“DOL”) uses a six-factor test for determining whether an intern is exempt from the FLSA or, conversely, is an employee subject to the FLSA’s protections. While the DOL notes that the intern/employee question “depends upon all of the facts and circumstances” of the program, the DOL also takes the position that all six criteria must be met in order for an intern to fall outside the parameters of the FLSA: 

  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 intern understand that the intern is not entitled to wages for the time spent in the internship.

U.S. Dep’t of Labor, Wage & Hour Div. Fact Sheet No. 71: Internship Programs Under the Fair Labor Standards Act, available at http://www.dol.gov/whd/regs/compliance/whdfs71.htm.  The factors enunciated in the test derive in part from the U.S. Supreme Court’s decision in Walling v. Portland Terminal Co. 330 U.S. 148 (1947).  In Walling, the Court noted that while the FLSA’s definition of “employ” is broad, it “was obviously not intended to stamp all persons as employees who, without any express or implied agreement, might work for their own advantage on the premises of another.”

In addition to the DOL’s six-factor test, some jurisdictions have other requirements that must be met in order to remove an intern from state wage and hour protections. E.g., New York State Dep’t of Labor, Wage Requirements for Interns in For-Profit Businesses, available at http://www.labor.ny.gov/formsdocs/factsheets/pdfs/p725.pdf.

Unpaid Internships in the News

The U.S. Court of Appeals for the Second Circuit announced last month that it would hear interlocutory appeals of two unpaid internship cases in tandem. The cases, Glatt v. Fox Searchlight Pictures, Inc. and Wang v. Hearst Corp., both involve potential classes of interns who claim they were truly employees and entitled to the minimum wage and overtime protections of the FLSA.

In Fox, the federal district court held that the interns were employees covered by the FLSA and that they had satisfied the requirements for class certification under both the FLSA and New York Labor Law. Fox, 293 F.R.D. 516 (S.D.N.Y. 2013).  Applying the DOL’s six-factor test, the district court found that interns on the set of the movie Black Sawn were performing work that was similar to or displaced that of paid employees.  These tasks included drafting letters, making photocopies, organizing filing cabinets, ordering lunches, and running errands.  In Hearst, the district court found a material question of fact regarding whether magazine interns who conducted online research, organized files, assisted at photo shoots, ran errands, and performed other tasks were interns or employees. Hearst, 293 F.R.D. 489 (S.D.N.Y. 2013).  However, the district court refused to certify the interns as a class, finding that under Wal-Mart Stores, Inc. v. Dukes, the plaintiffs had not established the commonality requirement; they “cannot show anything more than a uniform policy of unpaid internship.” 

Fox and Hearst are currently pending before the U.S. Court of Appeals for the Second Circuit.  Several prominent organizations—such as the Economic Policy Institute, the National Employment Lawyers Association, and the Chamber of Commerce of the United States—have filed amicus briefs in the cases.  Lawsuits involving unpaid workers are certainly not limited to the east coast.  On April 22, 2014, beauty school students filed a complaint against Estee Lauder and Aveda, alleging that the companies violated wage and hour laws by treating students as unpaid employees.  That case, Jennings v. Estee Lauder, Inc., No. BC543276, is pending in the Superior Court of California, County of Los Angeles. 

Outside of wage and hour law, unpaid interns have recently made waves in the civil rights context. Because civil rights laws typically apply only to “employees,” interns who fall outside of that definition under the applicable law may not be protected.  In Wang v. Phoenix Satellite Television US, Inc., a federal district court found that an unpaid intern could not bring a sexual harassment claim against her former employer under the New York City Human Rights Law because she was not an employee.  No. 13 Civ. 218 (PKC), 2013 WL 5502803 (S.D. N.Y. Oct. 3, 2013).  In response, the New York City Council passed legislation confirming that the law applies to interns, regardless of whether they are paid.  N.Y.C. Proposed Int. No. 173-2014A (amending N.Y.C. Admin. Code § 8-102).

Practical Guidance

The DOL takes the position that internships in the for-profit private sector will most often be deemed employment subject to the FLSA. Employers who have unpaid internship programs should review the programs with the DOL’s six-factor test in mind, and should consult legal counsel to ensure that any unpaid internship safely falls outside of the employment relationship.  The safest course of action in the private sector to avoid issue would be to treat the interns as employees.  Employers who are nonetheless considering utilizing unpaid interns should consider:

  • Collaborating with educational institutions to determine how the program can build on the academic experience and to assess whether the intern can receive educational credit for participating.
  • Assigning as the intern’s supervisor an individual with knowledge about the substantive area that the intern is to be learning.
  • Ensuring that supervisors overseeing the intern understand that the intern is not to perform work that other employees would normally perform.  Do not utilize interns to displace regular employees.
  • Ensuring that supervisors and other employees do not assign interns administrative tasks like photocopying and coffee runs that are not related to an educational benefit.
  • Offering experiences to the intern that are specifically for the intern’s benefit, even if they will impair company operations.
  • Requiring the interns to acknowledge in writing that they understand the program is an internship, that they are not employees, that the program is for their educational benefit, and that they will not be paid.
  • Setting specific dates for the beginning and end of the internship program so that the program does not morph into employment or something that looks more like employment.
  • Ensuring that the program trains the intern regarding the business or industry generally, and not only regarding work at the specific company.
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