With the recession dragging on and unemployment still stubbornly high, employers have been quick to embrace unpaid internships in recent years. And job-seekers have been eager to showcase their work ethic and to make workplace connections that might lead to a fulltime position. Interns are typically undergraduate students who are either unpaid or receive a modest stipend.
But last year the federal Department of Labor (DOL) issued a fact sheet governing internships and warned that enforcement would be a priority. Now employers must meet a six-point federal test to justify taking on unpaid workers. The "test" determines whether an intern is an employee for purposes of the Fair Labor Standards Act and reads as follows (to meet the "intern" designation, all six of these criteria must be met, according to the DOL):
1. The training is similar to vocational school.
2. The training is primarily for the benefit of the intern.
3. Interns do not displace regular employees, but instead work under their close supervision.
4. The company derives no immediate advantage from the intern's activities.
5. Interns are not necessarily entitled to a job at the conclusion of training.
6. Interns understand they are not entitled to wages
In light of these new regulations, employers should be very cautious about creating or continuing unpaid internships. The expectation now is that anyone making any worthwhile contributions in your workplace should be paid in accordance with standard wage and hour laws and regulations - and even if the intern agrees to receive no remuneration, it doesn't necessarily make the deal acceptable.
To avoid any misunderstandings, employers are advised to:
• Provide each intern with a written description of the program at the outset of the internship. This should indicate the duration of the internship as well as details such as the expectations and requirements of the position, the benefits to the intern, the training afforded by the program and whether the intern can expect future employment when the internship ends.
• State whether the position is an unpaid internship and if there is a stipend to cover expenses.
• Strive to comply with all six of the DOL's criteria - although at least one court has found that the determination should be based upon the "totality of the circumstances" even if all six factors are not satisfied.
• If in any doubt, consult with a knowledgeable employment attorney when setting up your internship program: A non-compliance finding by the DOL could have significant consequences and your company could be liable for back wages, including possible overtime pay, for all of its interns.
Todd Fredrickson is managing partner of the Denver office of Fisher & Phillips LLP, representing employers across the country in labor, employment, civil rights, employee benefits and immigration matters. He can be reached at 303-218-3660 or at firstname.lastname@example.org