Employers wishing to employ unpaid interns this summer may run afoul of the Fair Labor Standards Act (FLSA) which carries penalties of unpaid wages, attorneys’ fees and, possibly, an award of liquidated damages double the amount of the wage award, not to mention bad publicity. The FLSA requires employers to pay wages to any person the employer “suffers or permits to work.” The definition of employment is very broad. The FLSA permits employers to avail themselves of the services of unpaid interns, but in very limited circumstances.
The Wage and Hour Division of the United States Department of Labor issued Fact Sheet No. 71 for those “for profit” private sector employers to use in considering whether they may offer an unpaid internship program. Interns who are receiving training for their own educational benefit while interning at a “for profit” private sector employers may be unpaid if six criteria are met: 1) the internship is similar to training the intern 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; 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 time spent in the internship.
Internships structured around a classroom setting and that provide an employee credit hours from an educational facility are more likely to suggest that the internship is an extension of the student’s education. If the internship provides the intern with skills that may be used in multiple employment settings as opposed to skills specific to a particular employer, the internship is more likely to be considered training. The business should not be dependent on the work of the intern. If the employer replaces existing employees or would have hired additional staff but for the unpaid interns, then the unpaid internship may likely violate the FLSA. Interns who are supervised at the same level as the employer’s workforce may implicate an employment relationship. The internship should be for a fixed time period and should not be used as an extended-interview or trial period for permanent employment.
Some advisors recommend that an employer require an intern to execute an agreement indicating that the intern acknowledges he or she is unpaid. However, as the FLSA states that an employee may not waive entitlement to wages, a written agreement of this nature would not be particularly helpful. Aligning itself with the educational entity and insuring that the intern receives credit hours for the work performed is a better way to protect a business wishing to utilize unpaid interns.
For those interns who do not meet the six factor test, Employers should know that interns must be paid at least minimum wage and overtime for hours worked over forty in a week.
Internships with an educational component are good vehicles for businesses to expose themselves to desirable candidates but businesses should plan on paying interns absent the existence of all six of the above criteria.
This information is not to be construed as legal advice or as pertaining to specific factual situations as each circumstance carries with it a set of unique facts that might effect the legal outcome. Employers should not rely on the legal principles and theories discussed herein to support action, and are encouraged to seek legal advice as to specific factual situations.