Unpaid Internships

Unpaid Internships

Intern Programs and Compliance With the Law

For employers, December raises questions about how to prevent problems at the holiday party and what to do when the alcohol and holiday-spirit induced indiscretions inevitably arise. June brings questions about the unpaid interns scheduled to arrive in the next week or so. Although some companies have in place intern programs that comply with state and federal wage and hour laws, the arrival of the summer interns brings potential liability for many companies.

In the past, many companies did not worry about the risk because they thought it unlikely that an unpaid intern hoping for future employment with the company – or at least hoping for a positive reference – would file an administrative charge or a lawsuit for unpaid wages. That may no longer prove a safe bet as unpaid interns have recently filed a number of cases asserting wage and hour claims after finding that their internships looked more like unpaid employment (Wang v. Hearst CorporationJohn Henry et al. v. Warner Music Group Corp. et al. (NY Supreme Court Case Number 155527/2013); Lauren Ballinger and Matthew Leib v. Advance Magazine Publishers Inc, d/b/a Conde Nast Publications (U.S. District Court for the Southern District of New York, Case No. 13-4036).

What Qualifies an Unpaid Intern To Be Exempt From Federal and State Wage and Hour Laws?

The United States Department of Labor (DOL) looks at the following factors in distinguishing between unpaid interns and those interns that actually qualify as employees:

  1. The internship, even though it includes the actual operation of the facilities of the employer, is similar to training which would be given in an educational environment;
  2. The internship experience is for the benefit of the intern;
  3. The intern does not displace regular employees, but works under close supervision of existing staff;
  4. 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;
  5. The intern is not necessarily entitled to a job at the conclusion of the internship; and
  6. The employer and the intern understand that the intern is not entitled to wages for the time spent in the company

The California Division of Labor Standards Enforcement (DLSE) has identified the following factors:

  1. The internship is an essential part of an established course of an accredited school or training program;
  2. The internship program places interns at a number of companies rather than benefiting just one employer;
  3. The intern does not displace an employee (i.e., does not do work that an employee would otherwise perform); and
  4. A school or agency supervises the intern’s training.

The factor that seems to cause the most confusion and surprise for interns and companies has to do with the type of duties the intern will perform. If the intern will do work that benefits the company and that the company would otherwise assign to an employee, the person is probably not an intern.

What Are Your Rights As An Intern?

So, companies and interns often ask, does this mean that the intern cannot do anything of value to the company’s operations? Can he or she only do busy work that doesn’t really help the business? The line that separates appropriate but interesting work for an intern and challenging work that benefits the company can be hard to draw.

Some companies undoubtedly see unpaid interns as free labor and use them in a way that probably requires that they pay those interns as they would their employees. But many companies unwittingly make their unpaid interns employees by involving them in projects with other employees or assigning them a greater level of responsibility not because they see an opportunity for free labor, but with the goal of adding value to the internship and making the intern feel like a part of the team. Whatever the motivation, assigning actual work to unpaid interns creates potential problems.

As the summer internships begin companies and internships should keep a close eye on how the interns spend their summer, making sure that they not only establish internship programs that meet applicable federal and state standards but also that they monitor the work that their interns actually perform throughout the program.

How Rukin Hyland & Riggin LLP Can Help

Rukin Hyland & Riggin LLP is a San Francisco-based employment law firm whose practice focuses on all labor and employment law matters. For more information, please contact us for a free consultation.