DOL Guidance on Factors Requiring Paid Internships

The use of unpaid internships has come under close scrutiny, following lawsuits over the past couple of years alleging back wage debts against major fashion, entertainment, media and publishing companies. The U.S. Department of Labor (DOL), however, has long recognized the potential use of unpaid internships to exploit workers for free or cheap labor. To that end, the DOL WebSite provides a fact sheet that sets forth a test for determining when interns must be paid at least the minimum wage.

Background on Unpaid Internships

The issue of unpaid internships became the focus of national attention in 2013, when former unpaid interns began bringing lawsuits against major companies in New York City. According to a September 2014 article in The Economist, roughly 63 percent of U.S. students undertake at least one internship program before graduating. This estimate presumably includes many hardworking students in F-1 status who gain experience in internships via optional practical training (OPT).

Interns Covered by FLSA Must Be Paid

The Fair Labor Standards Act (FLSA) provides workers with certain protections, including a federal minimum wage that must be paid to the employee or intern. Not all positions are covered by the FLSA, however. Rather, the DOL utilizes a six-part test to determine whether a particular position, such as an internship, creates an “employment relationship” that falls under the FLSA. If so, even if the employer labels the position as an internship, the minimum wage must still be paid to the worker.

Six-Part Test Used by DOL

The six factors used by the DOL to determine whether a position must be paid pursuant to the FLSA focus on the educational or experiential value gained by the intern, and the relative value gained by the employer. Also considered is whether the intern displaces existing staff, and the existence of close supervision of the intern. The DOL looks at the day-to-day activities involved in the internship, the level of educational and training value gained during the internship, and whether or not the employer gains any immediate benefits in any practical way. As noted in the listed factors, the employer providing the internship or training should not derive an immediate advantage from the intern’s activities and, in fact, may actually be impeded by the activities of the intern.

Unpaid Internship Meets OPT Requirements, but Still May be Subject to FLSA Requirements

As discussed in the MurthyDotCom NewsBrief, ICE Confirms Unpaid Internships Count as OPT Employment, the initial 12 months of OPT may be spent in an unpaid internship. However, while such an internship is permitted under immigration law, this does not necessarily mean that the internship is exempt from the FLSA. Rather, it is still subject to the same six-part test as any other internship.

Conclusion

Internships can be a great way for recent graduates, including those on OPT, to obtain valuable work experience. Employers should be commended for offering legitimate internships to ensure that the future workers in a particular industry are properly trained. Internships can also serve as a means for companies to recruit and evaluate talent. Unpaid internships, however, should not be used as a way to circumvent requirements to pay workers.

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