Schools are out for the summer and many college and graduate students are looking for experience in what they hope will be their chosen careers. Employer’s looking to provide that experience through the use of unpaid internships must understand the rules that qualify an internship for "unpaid" status or unwittingly create potential wage and hour liability. Last summer, the U.S. Department of Labor announced that it would crack down on employer’s improper use of unpaid internships. There is no reason to believe the DOL’s interest in these kinds of investigations will be lessened this summer and so a refresher course is in order.
The Fair Labor Standards Act requires that employees be paid at least minimum wage for all hours worked. The FLSA excludes from coverage those persons who work for another for their own advantage such as an unpaid internship. The DOL has developed a six factor test for determining whether an internship qualifies for unpaid status. The factors include:
- Whether the internship, even though including actual operation of the facilities of the employer, is similar to training which would be given in an educational environment;
- Whether the internship experience is for the benefit of the intern;
- Whether the intern displaces regular employees, and works under close supervision of existing staff;
- Whether the employer providing the training derives no immediate advantage from the activities of the inter; and on occasion its operations may actually be impeded;
- Whether the intern is entitled to a job at the conclusion of the internship;
- Whether the intern understands that he is not entitled to wages for the time spent on the internship.
If the internship meets all six factors, it may qualify for unpaid status. However, the DOL takes a very narrow view of this exemption and believes that very few "for profit" employers can properly offer these programs. The DOL has published a Fact Sheet on Internship Programs under the FLSA. You can download the Fact Sheet here.
Other posts about unpaid internships:
6th Circuit Tosses DOL’s Internship Test (Cautionary Note: The Fifth Circuit (which includes Texas) has not tossed the DOL’s internship test).