As summer approaches, many employers are no doubt planning summer internship programs or deciding whether to hire interns for the summer. One of the most significant issues facing employers who hire interns, and one that has received a lot of media attention recently, is whether the interns must be treated as employees. Below is a brief explanation of relevant factors in determining whether interns are entitled to all of the legal rights of employees.
Under the Fair Labor Standards Act (“FLSA”), employees must be compensated for the services that they provide to their employers. The United States Department of Labor (“DOL”) has generally viewed internships in the for-profit private sector as employment. The DOL has issued guidance as to whether interns will be considered employees for purposes of the FLSA. Specifically, the DOL has explained that in order for interns to be excluded from the FLSA’s minimum wage and overtime pay requirements, six specific criteria must be met:
- The internship, even though it includes actual operation of the facilities of the business, is similar to training which would be given in an educational environment;
- The internship is for the benefit of the intern;
- The intern does not displace regular employees, but works under the close supervision of the existing staff;
- The business that provides the training derives no immediate advantage from the activities of the intern; and on occasion its operations may actually be impeded;
- The intern is not necessarily entitled to a job at the conclusion of the internship; and
- The business and the intern understand that the intern is not entitled to wages for the time spent in the internship.
The DOL has explained that all six criteria must be met; the absence of any one criterion will render an intern an employee subject to the requirements of the FLSA. Therefore, even if only one of the six criteria is not met, the employer must pay the intern no less than the applicable minimum wage and no less than time and a half for all hours worked over 40 in a week.
In clarifying the criteria set forth above, the DOL has explained that in general, an internship program “that is structured around a classroom or academic experience” where the intern receives academic credit is less likely to constitute employment, whereas an internship focused around an employer’s business operations is more likely to constitute employment. The DOL has also explained that where a business uses interns as substitutes for regular workers and the employer would have hired additional employees or required its existing staff to work additional hours to perform the work assigned to the interns, such interns are employees and are entitled to compensation under the FLSA.
Before hiring any interns, employers should provide them with a written agreement that sets forth the goals and objectives of the internship program, the intern’s responsibilities and duties, and any compensation and/or academic credit that will be awarded. Prior to drafting such agreements, employers should consult legal counsel because determining how to classify interns under the FLSA is a fact-specific inquiry.