While many employers see summer as the primary season for interns, these temporary employees are frequently placed throughout the school year, and the employment considerations that accompany them must be front of mind all year long. Through internship programs, employers can educate and recruit future employees, while offering students valuable experience. But this mutually beneficial relationship can present unforeseen consequences for employers that do not carefully consider the tasks interns perform and whether the law requires interns to be paid.
Under the Fair Labor Standards Act, an individual who is “employed” must be paid at least minimum wage for all hours worked. However, an employer—limited for purposes of this discussion to mean a for-profit private sector business—may be exempt from minimum wage laws if the internship serves the interest of the intern. The United States Department of Labor uses the following six factor test:
- The internship, even though it includes actual operation of the facilities of the employer, is similar to training which would be given in an education 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;
- The intern is not necessarily entitled to a job at the conclusion of the internship program; and
- The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.
Some jurisdictions, such as New York and California, have developed additional factors for consideration, such as intern training, screening, and benefits.
In a competitive job market, many interns are grateful for any internship opportunity, paid or unpaid. In the past few years, interns have successfully pursued claims for unpaid wages and liquidated damages against several high-profile companies. In 2013, a federal court held that unpaid interns were in fact employees of Fox Searchlight Pictures, Inc., entitled to compensation for their work on movies like Black Swan and 500 Days of Summer. More recently, similar class action lawsuits have resulted in multi-million dollar settlements with Warner Music Group Corp., Viacom, and NBCUniversal. Prudent employers should regularly evaluate their internship programs to ensure that any unpaid interns’ responsibilities do not entitle them to minimum wages. In addition to the aforementioned six factors and any state law requirements, employers should consider:
- Is the internship structured similar to an academic experience (i.e., job shadowing)?
- Are existing employees required to work additional hours to perform the intern’s responsibilities in the intern’s absence?
- Does the intern receive the same level of supervision as existing employees?
- Is the internship for a fixed duration?
- Is the internship understood to be a “trial period”?