Thursday, April 8, 2010

Department of Labor targets enforcement of rules against unpaid internships

More than a year ago, I cautioned employers about the legal risks of unpaid internships. At the time, I wrote that the Department of Labor uses a six-factor test to determine whether an intern is an employee in disguise, who must be paid. All six of the following factors must be met before an employer can legally refuse pay to an intern:
  1. Is the training similar to what would be given in a vocational school or academic educational instruction?
  2. Is the training for the benefit of the trainees or students?
  3. Do the trainees or students work under their close observation of regular employees without displacing them?
  4. Does the employer derive no immediate advantage from the activities of the trainees or students, and on occasion are the employer’s operations actually impeded?
  5. Are the trainees or students not necessarily entitled to a job at the conclusion of the training period?
  6. Do the employer and the trainees or students understand that the trainees or students are not entitled to wages for the time spent in training?
Last week, Steven Greenhouse wrote in the New York Times that state and federal agencies are beginning to use these factors to crack down on for-profit businesses that use the services of unpaid interns:
The Labor Department says it is cracking down on firms that fail to pay interns properly and expanding efforts to educate companies, colleges and students on the law regarding internships. 
“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,” said Nancy J. Leppink, the acting director of the department’s wage and hour division.
Employers that use unpaid interns should pay careful attention to this issue. Better to scrutinize your interns under these six factors before the Department of Labor swoops in and does it for you. Even better to formalize the relationship in a written Internship Agreement that formally spells out how each of these six questions are answered in your favor.

I also recommend you have a look at what others have said on this important wage and hour compliance issue: Overlawyered, ABA Journal Daily News, Lawffice Space, The Word on Employment Law with John Phillips, Manpower Employment Blawg, The HR Capitalist,, Warren & Hays Employment Law Blog, Workplace Prof Blog, Minding the Workplace, and The Business of Management.