Summer is officially here, which for many employers, is the season of unpaid internships. What was once seen as an opportunity for students to get "real-world" work experience during summer break has in recent years become a hotly contested issue. Unpaid intern lawsuits have swept the nation and the U.S. Department of Labor ("DOL") has taken a firm stance on the topic.
So, what's the buzz about? Generally, the FLSA requires that "employees" be paid at least minimum wage and receive overtime compensation for all hours worked over 40 in a workweek. The DOL argues that many summer interns are actually "employees," and therefore, should be paid as such. The burden is on the employer to analyze its internship opportunities to determine whether the interns qualify as employees under the FLSA. Unfortunately, the analysis is multi-factored and the conclusion is not always clear.
The DOL takes the position that if ALL six of the factors below are satisfied, the intern is NOT an employee and the internship may be unpaid.
- The internship, even though it includes actual operation of the facilities of the employer, is similar to training which would be given in an educational environment.
- The internship is for the benefit of the intern.
- The intern works under close staff supervision and does not displace regular employees.
- The employer derives no immediate advantage from and may in fact be impeded by the intern.
- The intern is not necessarily entitled to a job after the internship.
- The employer and the intern understand that the intern is not entitled to wages.
If the factors above are not satisfied, the intern is an employee in the eyes of the DOL, and must be paid at least minimum wage and time and a half for all hours worked over 40 in a workweek. For an employer, this may mean turning an unpaid internship into a paid internship, or increasing the pay of a low-paying internship to ensure compliance with minimum wage and overtime requirements.
Note, however, that the DOL makes an exception for unpaid internships in the public sector and for non-profit charitable organizations. If the intern volunteers his or her time without expectation of compensation, the DOL generally permits the internship to be unpaid.