With the abundance of college graduates scrambling for too few paid jobs, many employers are nabbing them for unpaid internships—hoping to keep this talent until paid positions become available. But employers need to be careful with this approach so as not to run afoul of the federal minimum wage and overtime law.
The Fair Labor Standards Act (FLSA) provides minimum wage and overtime protection to those employed within the meaning of the FLSA. To “employ” means to “suffer or permit to work.” The U.S. Department of Labor (DOL) has developed six factors to evaluate whether a trainee, intern, extern, apprentice, graduate assistant, or similar individual is to be considered an employee. If all of the following six factors are met, then an employment relationship does not exist and the individual is not considered an employee entitled to minimum wage and overtime under the Act:
- The training is similar to what would be given in a vocational school or academic educational instruction.
- The training is for the benefit of the trainee or student.
- The trainees or students do not displace regular employees but work under their close supervision.
- The employer that provides the training derives no immediate advantage from the activities of the trainees or students, and on occasion the employer’s operations may actually be impeded.
- The trainees or students are not necessarily entitled to a job at the conclusion of the training period.
- The employer and the trainees or students understand that the trainees or students are not entitled to wages for the time spent in training.
If you utilize unpaid interns in your organization, use these factors as a checklist and document them to the extent you can. That documentation will come in handy if the relationship sours and the intern files a wage claim seeking compensation.
Further information about internship programs under the FLSA can be found in the DOL’s Fact Sheet #71.