[1]This is the time of year when the hiring of interns is at its peak. Although a major opportunity for both the intern and your company, if not undertaken in compliance with the law, mistakes can result in expensive legal risks. Under the Fair Labor Standards Act (“FLSA”), any individual who is “employed” by an employer must be compensated. The term “employed” is interpreted very broadly under the FLSA. According to the Department of Labor, internships in the for-profit sector will most likely be viewed as employment unless the individual meets the “trainee” test established under federal law or if can be proven that the intern is serving only his/her own interest. If the individual does not meet the trainee test, he/she must be paid at least minimum wage and overtime compensation for hours actually worked in excess of forty hours in a workweek.
The Test for Unpaid Interns
The determination of whether an internship meets the requirements of the “trainee” test is dependent upon all the facts and circumstances of each program. In making such determination, the Department of Labor has proscribed in its Fact Sheet #71: Internship Programs under the Fair Labor Standards Act, that the following six criteria must be applied:
- 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;
- The internship experience is for the benefit of the intern;
- The intern does not displace regular employees, but works under close supervision of existing staff;
- 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;
- The intern is not necessarily entitled to a job at the conclusion of the internship; and
- The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.
If all of these criteria are met, then the individual is an intern and is not covered under the FLSA. Notably, in a recent case out of the Sixth Circuit (of which Michigan is part), the Court clearly focused on which party received the primary benefit of the work performed in determining that students should be paid for their work at the sanitarium which they likewise attended for boarding school. The Court stated that the primary benefit test provides “a helpful framework for discerning employee status in learning or training situations.”
However, keep in mind that one of the most troubling points of the above test and the established case law, is that employers will have difficulty establishing that there is no immediate advantage to the employer (paragraph 4 above). Thus, the only way around the fourth prong would be to have the intern merely shadow another employee. This may not be what employers expect out of an internship program.
Conclusion
As with many wage and hour issues, the determination of whether an individual is an employee or an intern is factually driven. Because failure to properly classify employees may result in significant liability including back wages, overtime, penalties and liquidated damages. Thus, if you are in doubt, seek advice from an attorney who specializes in employment law.
Authored by Heather Ptasznik. Ms. Ptasznik is an experienced and proactive attorney with the law firm of Kotz, Sangster, Wysocki, P.C., and specializes in all areas of employment law. If you would like further information regarding the issues raised in this newsletter or any other employment related issues, please contact Ms. Ptasznik at (248) 646-1052 or [email protected] [2]. The information in this article is provided as general information service and should not be construed as and does not contain legal advice on any specific matter, nor does this message create an attorney-client relationship.