Regulators Crack Down on Unpaid Internships

Labor regulators from California, New York and the U.S. Department of Labor are cracking down on employers’  improper use of unpaid interns.  Meanwhile, sources such as the National Association of Colleges and Employers report that the number of unpaid intenships continues to rapidly grow.

The Fair Labor Standards Act requires employers to pay employees the federal minimum wage, plus overtime, unless their jobs qualify for a statutory exemption.  The FLSA creates a limited exemption for “trainees,” the category into which unpaid interns should fall.  To qualify for the exemption, a trainee’s position must satisfy a six part test, excerpted below.  Essentially, the job must be educational; primarily for the benefit of the trainee; not at the expense of paid employees; and not a prerequisite to permanent employment. 

The Six Part FLSA “Trainee” Test

1. The training, even though it includes actual operation of the facilities of the employer, is similar to what would be given in a vocational school or academic educational instruction;
2. The training is for the benefit of the trainees;
3. The trainees do not displace regular employees, but work under their close observation;
4. The employer that provides the training derives no immediate advantage from the activities of the trainees, and on occasion the employer’s operations may actually be impeded;
5. The trainees are not necessarily entitled to a job at the conclusion of the training period; and
6. The employer and the trainees understand that the trainees are not entitled to wages for the time spent in training.

 Other states impose different or additional requirements.  In California, for example, unpaid interns must receive college credit.

The temptation exists, particularly in this economy, to take this issue lightly.  Arguably, giving an unpaid intern “real work” is not only a victimless crime, it is mutually beneficial to the intern and the employer.  Students need experience to enter the work force and unpaid internships are a low risk, low cost avenue for employers to provide students with such experience.  But there is another potential set of victims here: employees who are displaced by illegal, unpaid labor.  Is it fair for an employer to dump paid employees in favor of interns who are willing to work for free?  The labor laws say it is not.

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