Know the Law Before Paying Students Less Than Minimum Wage



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This is the second in a series of articles about exceptions to the Fair Labor Standards Act's minimum wage rule. This article discusses student-learner wages. Read the first article here and the third article here.

he Fair Labor Standards Act (FLSA) sets the nationwide minimum wage for most employees, but some workers, such as student learners, can be paid less if certain conditions are met. Employment attorneys say, however, that the student-learner exception is limited.

"Because both the student learners and the employers can benefit from this scheme, the DOL [Department of Labor] acknowledges that something less than the statutory minimum wages sometimes makes sense," said Jim Paul, an attorney with Ogletree Deakins in St. Louis. "But there are strict requirements and authorization procedures that must be met."

FLSA Section 14(a) authorizes employers to pay student learners 75 percent of the standard minimum wage—which is currently $7.25 an hour—after the employer has applied for an authorizing certificate from the U. S. Department of Labor.

These certifications are typically limited to occupations requiring an extended period of specialized training, said Libby Henninger, an attorney with Littler in Washington, D.C.

[SHRM members-only HR Q&A: When can an employer pay less than the federal minimum wage under the FLSA?]

The DOL's wage and hour division defines a student learner as someone who is:

• At least age 16 (or 18 for hazardous jobs).
  
• Receiving instruction in any accredited school.
  
• Employed on a part-time basis pursuant to a bona fide vocational training program.
  

Properly framed, these relationships benefit students greatly in a way that regular employment cannot, because the work performed is in the context of the educational experience, said Kathleen Anderson, an attorney with Barnes & Thornburg in Fort Wayne, Ind., and Columbus, Ohio.

This is different from the normal employment relationship in which the primary beneficiary of the work performed is the employer. But employers shouldn't assume that their interns will fall under this special category—such jobs should be considered separately.

Businesses typically use the student-learner wage rate for on-the-job training in a given vocation, Henninger said. "Given the specific educational requirements and limitations on hours of work, this subminimum wage rate usually cannot be applied for most internship or externship opportunities."

Pitfalls to Avoid

Employers must ensure that all approvals are obtained before the student learner starts working, because the certification can't be retroactively applied to any time worked before the certification process is started, Henninger noted.

Furthermore, in calculating the subminimum wage rate, employers cannot round down. For example, 75 percent of the current minimum wage of $7.25 is $5.4375. So employers must pay at least $5.44 to be in compliance with the FLSA.

Employers should also carefully track when the student's instruction ends. When the worker graduates or stops receiving instruction, paying a subminimum wage is no longer legal, Paul said.

Some states don't allow employers to pay subminimum wages at all, and even some states that do permit subminimum wages have higher minimum wage rates than under federal law.

Many states also impose extra requirements on employers that hire minors, such as additional work-hour limitations or requiring minors to obtain work permits. "For student learners who are minors, these state requirements would still have to be followed," she added. 

To ensure legal compliance, educational entities should identify the primary beneficiary of the work relationship, Anderson said. "They certainly don't need or want the DOL making a demand for back wages for students.

"The student should receive an educational benefit from the relationship, and the training element needs to be educationally sound," she added. Students should not be shortchanged educationally in exchange for their work."

Tips for Employers

Employers must make sure that the hours worked by student learners are properly recorded and that any hours worked in excess of what's allowed under the FLSA are paid at a rate of at least minimum wage, Henninger said.

Employers should do their homework—just like their student workers should be doing, Paul said. The laws and regulations on this issue and the minimum wage itself have the tendency to change, especially at the state and local levels. 

There should be written agreements signed by both the student learners and the accredited educational programs to ensure that everyone understands the ground rules and the relationship. 

"Finally, these relationships allowing the payment of subminimum wages are not meant to be long term or permanent, and they should not be abused in that fashion," Paul said.

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