DOL Sets Internship Standards as Students Head for Summer Jobs

By Theresa Minton-Eversole Apr 27, 2010
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The U.S. Department of Labor (DOL) has released a new set of standards to help employers determine whether interns must be paid the minimum wage and overtime under the Fair Labor Standards Act (FLSA) for their services. The standards apply only to those interns working for “for-profit” private sector employers.

The FLSA defines the term “employ” broadly, and most internships in the “for-profit” private sector are viewed as employment rather than training. Interns in the “for-profit” private sector who qualify as employees rather than trainees typically must be paid at least the minimum wage and overtime compensation for work that exceeds 40 hours per week.

There are some circumstances under which individuals who participate in “for-profit” private sector internships or training programs may do so without compensation. The Supreme Court has held that the FLSA definition of work cannot be interpreted so as to make a person whose work serves only his or her own interest an employee of another who provides aid or instruction. This may apply to interns who receive training for their own educational benefit if the training meets certain criteria.

The DOL fact sheet provides a list of six criteria that must be applied when determining whether an internship should be considered training rather than employment:

  • The internship, even though it includes actual operation of the facilities of the employer, is similar to training that would be given in an educational environment.
  • The internship experience is for the benefit of the intern.
  • The intern does not displace regular employees but works under close supervision of staff.
  • The employer that provides the training derives no immediate advantage from the activities of the intern and on occasion its operations might be impeded.
  • The intern is not necessarily entitled to a job at the conclusion of the internship.
  • The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

If all of these factors apply, an employment relationship does not exist under the FLSA and the law’s minimum wage and overtime provisions do not apply to the intern.

Educational vs. Work Environment

The more an internship program is structured around a classroom or academic experience, such as with college or university oversight of for-credit programs as opposed to the employer’s actual operations, the more likely the internship will be viewed as an educational experience rather than employment. And the more the internship provides the individual with skills that can be used in multiple employment settings, as opposed to one employer’s worksite-specific skills, the more likely the intern would be viewed as receiving training. Under these circumstances the intern does not perform the routine work of the business on a regular and recurring basis and the business is not dependent upon the work of the intern; thus, the employer is not obligated to pay the intern for services, said DOL. Likewise, if the employer is providing job shadowing opportunities that allow an intern to learn certain functions under the close, constant supervision of regular employees but the intern performs minimal or no work, the activity is more likely to be viewed as a bona fide education experience.

The internship should be of a fixed duration established prior to the outset of the internship. Further, unpaid internships generally should not be used by the employer as a trial period for individuals seeking employment at the conclusion of the internship period. If an intern is placed with the employer for a trial period with the expectation that he or she will then be hired on a permanent basis, that individual generally would be considered an employee under the FLSA.

If interns are engaged in the operations of the employer or are performing productive work (e.g., filing, other clerical work or customer assistance), however, then the fact that they might be receiving some benefits in the form of a new skill or improved work habits will not exclude them from the FLSA’s minimum wage and overtime requirements because their employers benefit from their work as well. Also, if the intern receives the same level of supervision as the employer’s regular workforce, this would suggest an employment relationship rather than training.

Likewise, if an employer uses interns as substitutes for regular workers or to augment its workforce during specific periods when workers might have been hired instead, these interns will be viewed as employees and entitled compensation under the FLSA, the department states.

Mixed Reactions

Some experts warn that these new standards might cause employers to provide fewer internship opportunities for students, while others see them as a way to curb some employers’ reliance on internships as free labor. However, some of the “sticking points” related to internship programs were addressed in an in-depth article featured in the February 2010 issue of NACE Journal, published by the National Association of Colleges and Employers (NACE).

It is “always difficult for employers to treat interns as nonemployee trainees or volunteers,” wrote George C. Hlavac and Edward J. Easterly, attorneys in the Labor and Employment Law Department of the firm Tallman, Hudders & Sorrentino, P.C. “This is because, generally, an employer treats its interns the same way as the rest of its employees. The interns perform the same or similar work performed by other employees, they are supervised and directed like other employees and are often provided with a financial or other benefit at the direction of the employer.”

But in light of the DOL’s new standards, they wrote, “As a practical matter, employers need to review all aspects of the relationship before determining that the intern is not an employee, thereby absolving the employer of many of the legal responsibilities to that individual.”

However, said Nancy Hammer, the Society for Human Resource Management’s manager of regulatory and judicial affairs, “Internships are a valuable way for young people to gain workplace skills, especially at a time when employers are concerned about a lack of skills among new entrants to the workforce.” She continued: “Given the Labor Department’s enhanced enforcement in this area, HR professionals should take this opportunity to review their internship policies to ensure they track DOL requirements.”

Experts offer employers recommendations for implementing internship programs:

  • Develop a detailed program that fits the specific needs. “Determine whether the intern will be compensated, the workspace the intern will use, and what type of supervision will be provided. If the internship is sponsored by the educational institution, the company needs to coordinate with the school to determine any specific requirements mandated by the institution.”
  • Implement an orientation program that defines the intern’s role. The intern “should be informed what training is provided, what projects will be assigned and who he or she reports to. A clear definition of the intern’s role will limit any questions on his or her status within the organization (and may limit liability if an organization intends to provide the internship on an unpaid basis).” In addition, they wrote, all corporate policies and procedures should be reviewed with the intern during orientation, including safety requirements and nondisclosure and noncompete agreements.
  • If the internship is paid, any “time-keeping” requirements should be discussed during this meeting. “In today’s world, many organizations use virtual employment techniques outside of the workplace. An intern should be instructed in what constitutes working hours so proper compensation can be determined and the company is not exposed to liability under the FLSA.”

Finally, they advised that because of the variety of laws and legal issues that might arise, internship programs should be reviewed by counsel prior to implementation.

The DOL plans to continue reviewing the need for additional guidance on internships in the public and nonprofit sectors. For additional information, visit the DOL’s Wage and Hour Division web site or call the agency’s toll-free information and helpline, 1-866-4USWAGE (1-866-487-9243).

Theresa Minton-Eversole is an online editor/manager for SHRM.

Related Article:

Some Internships Might Be Challenged as Off-the-Clock Work, SHRM Online Legal Issues, April 9, 2010

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