Now that it’s summer, many employers are hiring students. Students have always been viewed as a cheap means to bolster the workforce. Many students are even willing to forego a paycheck in order to gain experience they can add to their resumes. Employers are all too happy to have help for the summer that does not cut into their bottom line, so they frequently hire students as unpaid interns. Employing unpaid interns, however, comes at a risk.
Last year, the Department of Labor (DOL) announced it was aggressively focusing on employers who employ unpaid interns in violation of the Fair Labor Standards Act’s (FLSA) minimum wage requirements. In order to qualify as exempt from minimum wage requirements, according to the DOL, an internship must meet the following six criteria:
- 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 experience is for the benefit of the intern;
- The intern does not displace regular employees, but works under close supervision of existing staff;
- The employer 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 employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.
To be clear: each one of these conditions must be satisfied or else the DOL will determine that an intern is entitled to payment of wages. These conditions are difficult to meet, especially those within item 4. It is the rare occasion when an employer derives no advantage or benefit because of the work performed by an intern.
On April 28, 2011, The United States Court of Appeals for the Sixth Circuit (Ohio, Kentucky, Michigan and Tennessee) determined the DOL’s criteria are “overly rigid” and declined to follow the guidelines. In reaching its decision, the Sixth Circuit joined with the Fourth Circuit (Maryland, North Carolina, South Carolina, Virginia and West Virginia). In contrast, the Fifth Circuit (Louisiana, Mississippi and Texas) endorsed and followed the DOL’s criteria.
Regardless of the outcome in court, the DOL will continue to make policing unpaid internships a priority and will continue to apply its own criteria when analyzing unpaid internships. For employers, it is important to analyze any unpaid internships with the DOL’s six factors in mind.