United States Department of Labor and California's Division of Labor Standards Enforcement Clarify Rules Governing Compensation for Interns
In April 2010, the U.S. Department of Labor (DOL) issued a new Fact Sheet discussing the circumstances under which “interns must be paid the minimum wage and overtime under the Fair Labor Standards Act (FLSA) for services that they provide to ‘for-profit’ private sector employers.” At the same time, California’s Division of Labor Standards Enforcement (DLSE) stated in an opinion letter that it will apply the same rules that the DOL has applied in the past and will continue to apply as described in the Fact Sheet.
As a general rule, the DOL has taken the position that interns providing services to for-profit employers are employees who are covered by the minimum wage and overtime provisions of the FLSA. However, the DOL has recognized that there are situations where individuals who participate in certain “for-profit” private sector internships or training programs may do so without being compensated for their work. According to the new Fact Sheet, for an individual to be considered an unpaid “intern,” the following six criteria must be met:
- The internship, even though it includes actual operation of the facilities of the employer, must be similar to training which would be given in an educational environment. According to the Fact Sheet, “the more an internship program is structured around a classroom or academic experience as opposed to the employer’s actual operations, the more likely the internship will be viewed as an extension of the individual’s educational experience.”
- The internship experience must be for the benefit of the intern.
- The intern must not displace regular employees. Rather, the intern must work under close supervision of existing staff.
- The employer that provides the training must not derive any immediate advantage from the activities of the intern, and on occasion its operations may actually be impeded.
- The intern is not necessarily entitled to a job at the conclusion of the internship. In this regard, the internship should not be used as a “trial period” to determine whether the individual is suitable for continued employment.
- The employer and the intern must understand that the intern is not entitled to wages for the time spent in the internship.
As the DOL notes in the Fact Sheet, the intern exclusion is “quite narrow” given that most individuals performing work for an employer are deemed to be employed under the FLSA’s extremely broad definition of “employ.” As a result, for-profit employers who intend to utilize interns without paying them minimum wage or overtime must carefully evaluate the realities of the situation to determine whether a bona fide intern relationship exists.
This entry was written by Jennifer L. Mora.