USDOL Provides Guidance On For-Profit Employer Use of Unpaid Internships

April 15, 2010

The topic of unpaid internships has taken on renewed importance since Steven Greenhouse’s article entitled “The Unpaid Intern, Legal or Not” appeared in the April 2, 2010 edition of The New York Times.

The article highlights the United States Department of Labor (USDOL)’s recent efforts to “[crack] down on firms that fail to pay interns properly and [expand] efforts to educate companies, colleges and students on the law regarding internships.”

Following the publication of this article, the USDOL Wage and Hour Division released “Fact Sheet #71: Internship Programs Under the Fair Labor Standards Act.” Fact Sheet #71 provides general information to help employers determine whether interns must be paid the minimum wage and overtime under the Fair Labor Standards Act (FLSA) for the services that they provide to “for-profit” private sector employers.

Under the USDOL’s test, each of the following six criteria must be met for the unpaid internship to be legally compliant:

  • 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
  • The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

If all of the factors listed above are met, an employment relationship does not exist under the FLSA, and the FLSA’s minimum wage and overtime provisions do not apply to the intern.

However, employers should understand the above test is difficult to meet. The more the intern performs the “routine work of the business” and takes the place of regular employees, the less likely the unpaid internship will be deemed legally compliant.

Employers must also remember to check any applicable state laws which may further restrict the use of unpaid interns. For example, under New York law, an unpaid student internship must consist of supervised, directed vocation experience which is necessary in order to fulfill the curriculum requirements of the intern’s educational institution.

The current position of the USDOL on unpaid internships is best described by Nancy J. Leppink, acting Director of the USDOL’s Wage and Hour Division, in the previously mentioned April 2nd The New York Times article:

“If you’re a for-profit employer or you want to pursue an internship with a for-profit employer, there aren’t going to be many circumstances where you can have an internship and not be paid and still be in compliance with the law.”

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