Time to Think About Interns

As second semester begins, many undergraduates are considering their summer employment options, and many are looking for internships.  In the past, this has been an area fraught with risk for unwary employers, particularly in labor friendly states like California and Massachusetts.  The DOL is making a new push for the use of unpaid interns in the private sector, which is a major departure from its position during the Obama administration.  Below is an overview of the DOL’s new intern guidance (located here), as well as ongoing risks for employers to consider.

When determining whether an intern is properly classified under the Fair Labor Standards Act (FLSA), courts have identified the following seven factor test:

1. The extent to which the intern and the employer clearly understand that there is no expectation of compensation. Any promise of compensation, express or implied, suggests that the intern is an employee—and vice versa.
2. The extent to which the internship provides training that would be similar to that which would be given in an educational environment, including the clinical and other hands-on training provided by educational institutions.
3. The extent to which the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit.
4. The extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic calendar.
5. The extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning.
6. The extent to which the intern’s work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern.
7. The extent to which the intern and the employer understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship.

The test is a flexible one, and no single factor is determinative, which means a court will look at the unique circumstances of each case.

Think you may be ready to take the plunge?  Before you do, consider the risks inherent in using unpaid interns.

1. Employers must also comply with state law.  

Under Massachusetts law, most for-profit companies must pay interns at least minimum wage.  The Massachusetts Minimum Fair Wage Law and Regulations (the “Wage Act”) specifically states that the following five types of work are the only occupations permitted to be performed by unpaid interns):

1. Professional service;
2. Agricultural and farm work;
3. Work by persons being rehabilitated or trained under rehabilitation or training programs in charitable, educational or religious institutions;
4. Work by members of religious orders; or
5. Outside sales work regularly performed by outside salesmen who regularly sell a product or products away from their employer’s place of business and who do not make daily reports or visits to the office or plant of their employer.  (M.G.L. c. 151, § 2).

Unlike the FLSA, as outlined above, the training exception to the Wage Act is limited to only charitable, educational or religious institutions, removing the possibility that a for-profit company could utilize the exception for an unpaid internship program structure.   Additionally, “professional service” is a restricted group, limited to such professions as a doctor, lawyer or engineer and not the more commonly sought undergraduate internships.

In short, in Massachusetts, unless the organization is charitable, educational or religious, or the internship is for a professional service (as defined above), interns must be paid at least minimum wage.

2.  The DOL does not determine whether your interns should be paid, the courts do.

Over the past several years, a number of high profile cases involving interns have made their way through the courts.  Companies like Fox Searchlight and GM have been sued for failing to pay interns.  While the specific factors a court will examine will vary depending on jurisdiction, there are a few major factors the courts will be looking at.

Is the training similar to that the intern would receive at a vocation school?

In other words, is the intern learning the skills of the trade for which he or she is interning?  If your accounting intern is running errands, buying coffee, and answering phones, you may face an issue.

Is the training for the benefits of the intern, or does the employer derive an immediate advantage from the activities of the interns?

In addition to the intern benefiting from the internship, the company must also show that it received no immediate advantage from the intern’s work.  While it is acceptable for the performance of tasks by interns to have some benefit, this limited benefit should be counter-balanced by impediments to the employer’s operations in both time and economic costs in teaching the intern the activities, reviewing any work performed as well as economic costs to the business of participating in the program.

Do the interns displace regular employees?

If the intern is filling a position that would otherwise be filled by a paid employee, the intern should be paid at least minimum wage.

Unsure about interns?  We can help.