Virginia Business Law Blog

Earlier this year the Department of Labor Wage and Hour Division released Fact Sheet #71, outlining what requirements an unpaid internship position must meet in order to comply with the Fair Labor Standards Act (FLSA). The FLSA, which applies only to for-profit entities, restricts the ability of companies to hire interns for uncompensated positions:

The Fair Labor Standards Act (FLSA) defines the term “employ” very broadly as including to “suffer or permit to work.” Covered and non-exempt individuals who are “suffered or permitted” to work must be compensated under the law for the services they perform for an employer. Internships in the “for-profit” private sector will most often be viewed as employment, unless the test described below relating to trainees is met. Interns in the “for-profit” private sector who qualify as employees rather than trainees typically must be paid at least the minimum wage and overtime compensation for hours worked over forty in a workweek.

The six-part test is as follows:

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;

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 internship.

This six-point test was developed by the Department of Labor in response to the 1947 Supreme Court decision of Walling v. Portland Terminal Co., 330 U. S. 148 (1947). Although the DOL states that all six points must be met in order for an internship to be exempt from FLSA requirement, these guidelines do not have the force of law of statute or court precedent. Currently, there is a Circuit split as to whether all these requirements must be met, or if the proper test is a totality-of-the-circumstances approach, under which an internship may not strictly meet every requirement, but nevertheless still qualify for the exemption.

Not everyone is happy with the DOL’s clarification of the internship requirements. Thirteen college presidents have signed a letter to the Department of Labor [PDF] urging them to reconsider any increased regulation of student internships, but for now, the guidelines issued in Face Sheet #71 stand.

But until the DOL changes course on the issue, employers should craft their internship programs to stay in compliance with the six point test listed above. To do so, the following suggestions should be kept in mind:

- Before beginning an internship program, have clearly defined time limits on how long the internship is intended to last for, e.g., for a time-span equivalent to a school semester, over the summer break, or for a six month period.
- Provide interns with a higher level of supervision than the firm’s employees receive. Having interns shadow regular employees is a good way of meeting this requirement.
- Keep in mind that just because a student earns course credit for the position does not automatically make it an internship.
- Make it clear that the internship is not merely a “trial period” used to evaluate a candidate for a potential full-time position. The internship should have a clear starting and ending date, and there is no job offer riding on the intern’s performance.
- Consider having interns sign an agreement acknowledging that their internship is an uncompensated position, designed to provide an educational opportunity for students who want to learn more about their intended field.
- Make sure that the interns do in fact have an education experience — don’t just relegate them to making coffee and running the copy machine.
- And, if all else fails, consider offering minimum wage to your interns, and converting it into a paid internship position.

This entry was posted on Monday, August 16th, 2010 at 5:17 pm and is filed under Around the Office. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.