Employers may have their pick of applicants to fill paid and unpaid internship positions this fall. Internships traditionally are sought by college students to gain work experience, but the recession and the resulting loss of jobs have prompted people of all experience levels to apply for internships with companies in order to get their feet in the door. Employers, however, must be aware of the wage-hour laws’ impact on such arrangements.

A survey conducted for CareerBuilder between May 18, 2010, and June 3, 2010, of more than 2,500 employers shows more than one-half (52%) of them saying they are likely to hire interns as full-time, permanent employees. The survey, released August 11, 2010, shows that almost one-quarter (23%) of employers are seeing experienced workers (defined as having more than 10 years of experience) and mature workers (defined as those age 50 or older) applying for internships at their organizations. Additionally, more than one-quarter (27%) of employers say they plan to hire interns during the rest of 2010.

Often, either inadvertently or by design, employers do not treat interns as employees. Instead, interns are frequently labeled trainees, assistants, or learners and receive little or no pay for the work they perform. Unless a job meets certain conditions, interns are considered employees and for-profit companies must pay them at least the minimum wage under federal and state laws.

Federal Criteria

The federal Fair Labor Standards Act (FLSA) defines an employee as “any individual employed by an employer.” 29 U.S.C. § 203(e)(1). The FLSA definition of employ includes “to suffer or permit to work.” In 1947, the U.S. Supreme Court held that the FLSA definition of employ does not make all persons employees who, without any express or implied compensation agreement, may work for their own advantage on the premises of another. Walling v. Portland Terminal Co., 330 U.S. 148. The Court pointed to six criteria that characterize interns or trainees who need not be paid:

* The training, even though it includes actual operation of the employer’s facilities, is similar to that which would be given in a vocational school;

* The training is for the benefit of the trainees;

* Trainees do not displace regular employees, but work under 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 completion of the training period; and

* The employer and the trainee understand that trainees are not entitled to wages for the time spent in training.

The U.S. Department of Labor consistently has applied these criteria in answering inquiries about the employment status of interns. Accordingly, whether or not interns at your organization are employees under the FLSA will depend upon all the circumstances of their activities. Provided the six criteria listed above are met, the Department of Labor says workers will not be considered employees if…

* Educational or training programs are designed to provide them with professional experience in the furtherance of their education; and

* The training is academically oriented for the benefit of the students.

Generally, employers must comply with all FLSA provisions and with state laws that are more restrictive in favor of the employee or require higher pay.

State Laws

State rules relating to the employee/unpaid-intern distinction vary. For example, to determine whether an intern is or is not an employee, the California Division of Labor Standards Enforcement (DLSE) applies the six Walling criteria (the DLSE uses “student” synonymously with “trainee”).

The Colorado Department of Labor and Employment Minimum Wage Order No. 26 provides that students employed in a work experience study program are exempt from all of the Order’s provisions, including the requirement to pay minimum wage. Consequently, the provisions of the FLSA apply to determinations whether a Colorado worker is an employee.

In Alaska, the Alaska Administrative Code allows for the employment of “student learners” (undefined in the law) at subminimum wages for fixed periods, subject to certain restrictions. An exemption from minimum wage is available when a student learner is enrolled in a course of study and training in a cooperative vocational training program under a recognized state or local educational authority or in a substantially similar program conducted by a private school. The employer and the student learner’s school coordinator or principal must apply for the exemption from the Alaska Department of Labor and Workforce Development. Such a subminimum wage rate cannot be less than 75% of the state minimum wage. 8 AAC §15.125.

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Employers who are planning to take on unpaid interns should become familiar with federal and state criteria for deciding whether a worker is an employee and take a hard look at how much productive work will be performed by their interns.

Whether labeled an intern, learner or employee, if a worker should have been paid but was not, the employer may find itself liable not only for wages, but also for overtime pay, employee benefits, meal and rest periods, and penalties. Jackson Lewis attorneys are available to answer inquiries regarding wage-hour and other topics that affect employers.

Source: Jackson Lewis