Unpaid Interns: When Are They Permitted?

As summer internship season approaches, employers should carefully institute internship programs which comply with the requirements of the Fair Labor Standards Act (FLSA)

The Test.

In the case of “for-profit” companies, unpaid internships must meet the strict criteria of the FLSA.  Specifically, as stated in U.S. Department of Labor’s (DOL) FLSA Fact Sheet #71 unpaid interns must:

  1. Receive training similar to that provided in an educational environment
  2. Be for the benefit of the intern, and not the employer
  3. Not displace regular paid employees
  4. Be closely supervised by existing staff
  5. Not be used for the immediate advantage of the employer (and in some cases, may impede the employer’s operations)
  6. Not necessarily be entitled to a job after the end of the internship
  7. Understand that the intern is not entitled to wages for time spent in the internship

The internship, then, should truly be a “training program” where the intern learns skills of a job; rather than a position where the intern is a “gopher” being exposed to the particular workplace atmosphere.  The FLSA excludes interns meeting these standards from the definition of “employment” and, accordingly, from its minimum wage and overtime requirements.

What about Not-For-Profit Companies?

Although a footnote to Fact Sheet #71 states:

Unpaid internships in the public sector and for non-profit charitable organizations, where the intern volunteers without expectation of compensation, are generally permissible,”

there is scant guidance from the DOL when such programs are permissible.  The DOL’s guidance on when unpaid workers are truly “volunteers” at public and charitable organizations relies on the US Supreme Court case of Tony and Susan Alamo Foundation v. Secretary of Labor.  There, the Supreme Court determined that even where individuals were willingly providing services for a religious, charitable organization without any expectation of payment, the services being provided by such individuals were in a “commercial enterprise” that provided products and services in competition with other for-profit commercial enterprises.  As a result, the FLSA applied to such individuals, and the non-profit Alamo Foundation was required to pay each individual minimum wage and overtime for services provided to the Foundation. 

The Consequences.

The Website set up by the plaintiffs’ law firm Outten & Golden, unpaidinternslawsuit.com, illustrates the perils of unpaid internships in the for-profit world.  Among the allegations in the lawsuits brought by former unpaid interns against Harper’s Bazaar magazine’s publisher Hearst Corporation, Fox Searchlight and Charlie Rose, is that the interns engaged in work also performed by other paid employees and work which immediately and directly benefited their respective employers.  And, the damages may not just be the repayment of federal minimum wage for the hours that the unpaid intern worked, but also overtime and state-imposed remedies, such as multiple damages or fines for not having paid wages in a timely manner.

Employer Precautions.

Just as with many areas related to workers’ wages, it seems that workers cannot waive their right to protection under the FLSA to minimum wage and overtime payments.  In order to avoid becoming a defendant in a lawsuit, for-profit and not-for-profit employers alike should double-check that their “unpaid interns” and their “volunteers” are, in fact, not entitled to pay.

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