Unpaid interns might be wrongly denied overtime or minimum wages.
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Background
The Fair Labor Standards Act (FLSA) defines the term “employ” very broadly as including to “suffer or permit to work.” Covered and non-exempt individuals who are “suffered or permitted” to work must be compensated under the law for the services they perform for an employer. Internships in the “for-profit” private sector will most often be viewed as employment, unless the test described below relating to trainees is met. Interns in the “for-profit” private sector who qualify as employees rather than trainees typically must be paid at least the minimum wage and overtime compensation for hours worked over forty in a workweek.
The Test For Unpaid Interns
Intern Rights — In January 2018, the U.S. Department of Labor replaced the old six-factor test with a seven-factor “primary beneficiary” test for unpaid internships at for-profit employers. Courts ask who is the primary beneficiary of the relationship — the intern or the employer — by weighing: (1) whether both sides clearly understand there is no expectation of compensation; (2) whether the internship provides training comparable to an educational environment; (3) whether it is tied to the intern’s formal education through coursework or academic credit; (4) whether it accommodates the intern’s academic commitments; (5) whether its duration is limited to the period of beneficial learning; (6) whether the intern’s work complements rather than displaces paid employees while providing significant educational benefits; and (7) whether both sides understand there is no entitlement to a paid job afterward. No single factor is dispositive — courts weigh all seven together. If the employer is the primary beneficiary, the “intern” is an employee owed minimum wage and overtime. Contact the Frisch Law Firm for a free consultation.
Training Comparable To An Educational Environment
Under the primary-beneficiary test, courts consider whether the internship provides training comparable to that which would be given in an educational environment. In general, the more an internship program is structured around a classroom or academic experience as opposed to the employer’s actual operations, the more likely the internship will be viewed as an extension of the individual’s educational experience (this often occurs where a college or university exercises oversight over the internship program and provides educational credit). The more the internship provides the individual with skills that can be used in multiple employment settings, as opposed to skills particular to one employer’s operation, the more likely the intern would be viewed as receiving training. Courts also consider whether the internship is tied to the intern’s formal education through coursework or academic credit, and whether the internship accommodates the intern’s academic commitments. Under these circumstances the intern does not perform the routine work of the business on a regular and recurring basis, and the business is not dependent upon the work of the intern. On the other hand, if the interns are engaged in the operations of the employer or are performing productive work (for example, filing, performing other clerical work, or assisting customers), then the fact that they may be receiving some benefits in the form of a new skill or improved work habits will not exclude them from the FLSA’s minimum wage and overtime requirements because the employer benefits from the interns’ work.
Complements Rather Than Displaces Paid Employees
Under the primary-beneficiary test, courts consider whether the intern’s work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern. If an employer uses interns as substitutes for regular workers or to augment its existing workforce during specific time periods, these interns should be paid at least the minimum wage and overtime compensation for hours worked over forty in a workweek. If the employer would have hired additional employees or required existing staff to work additional hours had the interns not performed the work, then the interns will be viewed as employees and entitled to compensation under the FLSA. Conversely, if the employer is providing job shadowing opportunities that allow an intern to learn certain functions under the close and constant supervision of regular employees, but the intern performs no or minimal work, the activity is more likely to be viewed as a bona fide education experience. On the other hand, if the intern receives the same level of supervision as the employer’s regular workforce, this would suggest an employment relationship, rather than training.
No Entitlement To A Paid Job
Under the primary-beneficiary test, both sides must understand that there is no entitlement to a paid job at the conclusion of the internship. The internship should be of a fixed duration, established prior to the outset of the internship. Further, unpaid internships generally should not be used by the employer as a trial period for individuals seeking employment at the conclusion of the internship period. If an intern is placed with the employer for a trial period with the expectation that he or she will then be hired on a permanent basis, that individual generally would be considered an employee under the FLSA.
