The Use of Unpaid Interns: Is It Worth the Risk?

Darrell VanDeusen
Darrell VanDeusen

It’s nearly summer time again, and that means a whole lot of high school and college students are looking for something to do. Since the economy hit the skids in late 2008, one popular option has been the “unpaid internship.” What better way to get some experience if you are a struggling student? Well, getting paid would be a start.

Private employers who want to create a summer intern program run a high risk of doing it wrong. There are more collective actions under the FLSA for unpaid wages than ever before.   This past week, for example, a federal judge in New York conditionally certified a collective action of some 3,000 unpaid interns who claim Warner Music Group Corp. improperly classified them as exempt from minimum wage and overtime pay. Grant v. Warner Music Grp. Corp., 2014 U.S. Dist. LEXIS 65664 (S.D.N.Y., May 13, 2014).

It is true that non-profits and the government (really) can have volunteer interns and not run afoul of wage and hour laws. But for-profit private employers need to be very careful.

The U.S. Department of Labor (DOL) has developed six rules to evaluate whether someone is a “trainee” (and therefore can be an unpaid intern) or an employee (and therefore must be paid) for purposes of the FLSA. Wage and Hour laws treat internships as training programs.  The fact that a student is getting educational credit for the internship, while significant and very helpful in this analysis, is not the end of the inquiry.  A student who expects to learn computer animation while interning, for example, had best not be relegated to the mail room for the internship period. Here are the DOL’s rules:

1.            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 (this is where getting credit comes in handy);

2.            The training is for the benefit of the trainee, not the employer (that is, it is not designed to save the employer money; getting educational credit shows this);

3.            The trainee does not displace a regular employee, but works under an employee’s close observation;

4.           The employer that provides the training gets no immediate advantage from the activities of the trainee, and on occasion the employer’s operations may actually be impeded (e.g., employee time spent on helping the trainee learn things takes away from the employee’s main duties);

5.            The trainee is not necessarily entitled to a job at the conclusion of the training period; and

6.            The employer and the trainee both understand that the trainee is not entitled to wages for the time spent in training. This is best established through the existence of a written understanding, and it is helpful if the written understanding includes (or even comes from) the institution that will provide the student intern with the educational credit.

So, private employers be forewarned: that if you do it wrong, the small savings you thought you had by not paying your interns could cost you a bunch later.

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