In recent days, there have been several news reports about the legality of unpaid internships and the Labor Department’s plan to crack down on employers’ who use unpaid interns.
For example, this week
The New York Times reported that Nancy J. Leppink, the Acting Head of the Department of Labor’s Wage and Hour Division, confirmed that the agency is “cracking down” on unpaid internships.
According to Ms. Leppink, “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.”
According to the Department of Labor (DOL), there are six criteria that employers must use to determine whether an intern should be paid. Other than what has appeared in news reports, there is little information on how the agency intends to increase enforcement on unpaid internships
The U.S. Department of Labor’s Wage and Hour Division (WHD) has developed the six
factors below to evaluate whether a worker is a trainee or an employee for purposes of
the FLSA:
- The training, even though it includes actual operation of the facilities of the employer, is similar to what would be given in a vocational school or academic educational instruction;
- The training is for the benefit of the trainees;
- The trainees do not displace regular employees, but work under their close observation;
- The employer that provides the training derives no immediate advantage from the activities of the trainees, and on occasion the employer’s operations may actually be impeded;
- The trainees are not necessarily entitled to a job at the conclusion of the training period; and
- The employer and the trainees understand that the trainees are not entitled to wages for the time spent in training.
If all of the factors listed above are met, then the worker is a “trainee”, an employment relationship does not exist under the FLSA, and the FLSA’s minimum wage and overtime provisions do not apply to the worker. Because the FLSA’s definition of “employee” is broad, the excluded category of “trainee” is necessarily quite narrow. Moreover, the fact that an employer labels a worker as a trainee and the worker’s activities as training and/or a state unemployment compensation program develops what it calls a training program and describes the unemployed workers who participate as trainees does not make the worker a trainee for purposes of the FLSA unless the six factors are met. Some of the six factors are discussed in more detail below.
Training Similar to Vocational School/The Primary Beneficiary of the Activity
In general, the more a training program is centered around a classroom or academy as opposed to the employer’s actual operations, the more likely the activity is training. Also, the more the training is providing the workers with skills that can be used in multiple employment settings, as opposed to skills particular to one employer’s operation, the more likely the worker is a trainee. On the other hand, if the workers are engaged in the primary operations of the employer and are performing productive work (for example, filing, performing other clerical work, or assisting customers), then the fact that they may be receiving some benefits in the form of a new skill or improved work habits is unlikely to make them trainees given the benefits received by the employer.
Displacement and Supervision Issues
Employers with bona fide training programs typically do not utilize trainees as a substitute for regular workers. If the employer uses the workers as substitutes for regular workers, it is more likely that the workers are employees as opposed to trainees. As well, if the employer would have needed to hire additional employees or require overtime had the workers not performed the work, then the workers are likely employees. Conversely, if the employer is providing job shadowing opportunities where the worker learns certain functions under the close and constant supervision of regular employees, but performs no or minimal work, this type of activity is more likely to be a bona fide training program; however, if the worker receives the same level of supervision as employees, this would suggest an employment, rather than a training, relationship.
No Job Entitlement/No Entitlement to Wages
Typically, before the work-based training begins, both the employer and the worker agree that the worker is not entitled to a job at the conclusion of the training period or wages for the time spent in training. The parties’ expectations regarding the compensation and job opportunities are relevant but not determinative. Even when such an agreement exists, hiring workers who finish the training program is considered in determining whether an employment relationship exists, and frequently hiring such workers suggests that the workers are not trainees. Finally, if the worker is placed with the employer for a trial period with the hope that the worker will then be hired on a permanent basis (even if the worker is not automatically entitled to a job at the end of the period), then the worker is not likely to be a trainee during the trial period.
Examples:
- The worker is placed in a classroom setting maintained by an employer to learn to be an electronic technician with no guarantee of future employment with the employer. After the training period, the employer hires the worker (even though the worker was not entitled to a job and most training participants do not receive offers of employment). Because the employer did not benefit from the worker’s activities during the training period and the training is very similar to the training that is provided in a vocational school, the training program is likely bona fide, and the worker is not an employee under the FLSA.
- A worker who participates in a program at a retail store or restaurant and who assists customers or operates a cash register with little supervision may be an employee because the employer derives tangible benefit (i.e., productive work) from the worker’s activities. Also, a worker who performs such work may result in the employer’s not hiring an employee whom it would otherwise hire, or result in a regular employee working fewer hours than he or she would otherwise work–-both of which suggest an employment relationship.
ADVISORY: TRAINING AND EMPLOYMENT GUIDANCE LETTER NO. 12-09 (PDF file)
