We have all been reading the countless headlines of companies being sued for the failure to pay their so-called interns. This list includes the LA Clippers, student athletes, and suits against many large companies across the country. In fact, NBC Universal recently settled a case with its unpaid interns for $6.4 million.
If your company has unpaid interns or is thinking ahead to summer plans for such interns, you should reevaluate those plans. As always, that pesky Fair Labor Standards Act is likely standing in your way. There is NO FLSA exception for students or interns. In fact, the term “intern” appears only once in the FLSA itself, in section 203(e)(2)(a), which exempts Congressional interns from the definition of employee, and only once in the regulations, in 29 C.F.R. Section 541.304(c), where it is explained that medical interns do not have to be paid on any particular basis.
Recently, as part of the increasing trend of FLSA collective actions, unpaid interns have been striking back. Interns are striking back in alarming numbers claiming to have worked significant hours without any compensation at all. Companies are claiming that they fall within the narrow “trainee” exception. But beware, that exception is quite narrow.
if you want to avoid liability for unpaid interns, you must meet all six of the DOL’s criteria for student trainees.
1.The training, even though it includes actual operation of the facilities of the employer, is similar to that which would be given in a vocational school.
The closer it is to a classroom or educational setting, the easier it will be to consider the individuals to be trainees. The arrangement might also result in a training certificate that could be listed as a job qualification on subsequent job applications. It would also help if the individual and the entity providing the training could first develop an individualized training plan that would be tailored to help the individual qualify for a specific job or range of jobs with a variety of companies via the training course.
2. The training is for the benefit of the trainees.
This would be an easy argument to make in the case of individuals participating in welfare-to-work programs, but also in any training or internship programs that tend to increase their “hireability” in the open job market.
3. The trainees do not displace regular employees, but work under close observation.
This would also be an easy argument to make, especially in the case of a training “academy” run by a company, but also for a work experience program sponsored by a governmental entity. In the latter case, the government agency would be able to show that were it not for the work experience program, the activities in question would not be taking place. In a true training environment, the trainees are not going to be trusted to do much actual work for the company; the actual production would presumably be done by regular employees, who of course are already trained and are paid for the production work.
4. The employer that provides the training derives no immediate advantage from the activities of the trainees, and on occasion his operations may actually be impeded.
This goes hand-in-hand with item # 3 above. It would be important here to document the training process and the before and after figures for comparison. Again, the actual productive work will be done by regular employees; any productive work done by trainees would have to be insubstantial in nature and amount and secondary to the training process.
5. The trainees are not necessarily entitled to a job at the completion of the training period.
Again, this is related to #3 above. The work would not be done at all, or at least certainly not on the schedule that exists, were it not for the existence of the training school or program under which the individuals receive training. The courts find it important to have a written agreement to the effect that trainees have no expectation or guarantee of employment upon completion of the training.
6. The employer and the trainees understand that the trainees are not entitled to wages for the time spent in training.
The courts find it important that there be a written agreement to the effect that payment for the services is neither intended nor expected.
In applying these criteria, courts focus on who primarily benefits from the arrangement. If the employer is the primary beneficiary, the individuals will be considered employees, but if the individuals are the ones who primarily benefit from the work experience, they will be considered trainees.
If you plan to use unpaid interns, you need to review your program in light of these criteria and determine whether you are obligated to pay the interns.