Internships and DOL Review

Monday, May 03, 2010

Recently, the U.S. Department of Labor has begun to look closely at the use of internships in the “for profit” sector and whether or not these individuals should be classified as “employees” rather than “trainees” under The Fair Labor Standards Act. To assist employers in properly classifying individuals as “employees” or “trainees”, the DOL has published, Fact Sheet #71: Internship Programs Under The Fair Labor Standards Act. This fact sheet describes six (6) facts and circumstances, which must be met to allow for the exclusion of internship individuals as “employees” under The Fair Labor Standards Act. Provided, the organization can successfully demonstrate their internship program meets these exclusionary provisions, the internship individuals are NOT subject to The Fair Labor Standards Act. Otherwise, internship individuals are considered statutory employees for the purposes of The Fair Labor Standards Act and “typically must be paid at least the minimum wage and overtime compensation for hours worked over forty in a workweek.”

Organizations should always consult with the appropriate legal resources on statutory matters such as The Fair Labor Standards Act. Employers should also review wage and hour regulations as they relate to non-covered Fair Labor Standards Act jobs and internships at the state and local level.

To be considered an intern for the purposes of The Fair Labor Standards Act, the organization’s Internship Program must meet the following 6 (six) facts and circumstances test:

1. The internship, even though it includes actual operation of the facilities of the employer, is similar to training which would be given in an educational environment.

Example: The internship program under review might include a period of time in a “classroom, worksite, lab or shop like” setting followed by a period of time observing the business operations or performing simulated work activities.  The program might also be under the direct supervision of an affiliated vocational, technical, trade, labor union, post-secondary, college, university or other educational institution.

2. The internship experience is for the benefit of the intern.

Example: The internship program under review provides the necessary experience to meet mandatory, statutory, labor relations or other requirements for vocational, technical or professional certifications.

3. The intern does not displace regular employees, but works under close supervision of existing staff.

Example: The internship program under review provides for time ("job shadowing") in the shop, on the floor, in the lab or at the worksite under the oversight of an assigned mentor, adviser, counselor, guide, tutor or teacher. Any “production” work completed by the intern is minimum and incidental to the organization’s operations.

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.

Example: The internship program under review may result in increased QC testing, rejections, re-work, scrap, production slowdown or downtime. Any “production” work completed by the intern may be sub-standard and not suitable for distribution to end customers and thus considered a “loss” by the organization.

5. The intern is not necessarily entitled to a job at the conclusion of the internship.

Example: The internship program under review may provide for written documentation acknowledged by both the organization and intern that the internship is of a "fixed duration" and intern must follow the standard application, interviewing, and selection processes as required of all other candidates. Nor is the intern is not given any extraordinary preference in the application, interviewing, and selection process.

6. The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

Example: The internship program under review may provide for written documentation acknowledged by both the organization and intern that the internship is “unpaid” and is intended to benefit the intern only and any value derived by the organization is minimum and incidental to the organization.

The Fair Labor Standards Act provides for an exception for individuals who volunteer their services for state and local government agencies for strictly humanitarian purposes. Exceptions are also available for individuals who volunteer without remuneration for religious, charitable, civic, or humanitarian non-profit organizations. Such internships are generally permissible under The Fair Labor Standards Act. However, the DOL is currently considering whether or not additional direction on such internships is required.