We previously posted an article that detailed how unpaid internships may prove costly for employers. In that article, we outlined some factors that may be used to determine whether your intern qualified as an employee and was required to be paid as one.
Now that the summer is upon us, if you have an internship program, now is the time to review your program for compliance and make any necessary adjustments.
The Department of Labor (“DOL”) has a six-part test to determine whether an internship or training program creates an employment relationship:
- the internship is similar to training that the intern would receive in an educational environment;
- the internship experience is for the benefit of the intern;
- the intern does not displace regular employees, but works under the close supervision of existing staff;
- the employer derives no immediate advantage from the activities of the intern, and its operations may actually be impeded at times;
- the intern is not guaranteed a job at the conclusion of the internship; and
- the employer and intern understand that the intern is not entitled to wages.
When all these factors are met, the DOL says that “an employment relationship does not exist.”
While the DOL’s guidance is a good starting point, some federal cases provide additional guidance as to how courts may answer the question.Several recent cases have applied the DOL’s six-part test; whereas, other cases have shown that courts are approaching the inquiry with more flexibility than the DOL.
In one case from a Florida federal court, the issue was decided after weighing various factors, with no one being determinative, and with no requirement that “all” factors be met.The court’s main focus was to determine who was the “primary beneficiary” of the relationship.Some of the factors to be considered included:
- the extent to which the internship is tied to the intern’s formal education program, through coursework or receipt of academic credit;
- the extent to which the internship corresponds to the academic calendar; and
- the extent to which the internship is limited in time to accomplish the beneficial learning.
At least one other court has reviewed a “non-exhaustive” seven-factor list that it used to make the determination of whether the intern was really an employee:
- the extent to which the intern and the employer clearly understand that there is no expectation of compensation. Any promise of compensation, express or implied, suggests that the intern is an employee—and vice versa;
- the extent to which the internship provides training that would be similar to that which would be given in an educational environment, including the clinical and other hands-on training provided by educational institutions;
- the extent to which the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit;
- the extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic calendar;
- the extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning;
- the extent to which the intern’s work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern; and
- the extent to which the intern and the employer understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship.
The court stressed the importance that no one factor is determinative, and that courts should use a flexible approach.In reaching its conclusion, the court used a method that it said focused more on the educational aspect of an internship.
A clear, bright line rule, of course, would be nice for businesses to understand and comply with. While the application of the various tests may differ, the common theme with all of these “factors” is education.The purpose of an internship is to learn and, while the intern may not be paid wages, the intern should be receiving the intangible value of knowledge.Bottom line, companies should be careful to ensure that they are not using interns as an opportunity for free labor.
As a practical suggestion, it makes sense to structure your program so that you are meeting the different factors set by both the DOL and the courts. If you already have an internship program in place, or are considering starting one, you should consult with your legal counsel to ensure compliance with this federal law.
Bruce E. Loren of Loren & Kean Law is based in Palm Beach Gardens and Ft. Lauderdale. Loren & Kean Law is a boutique law firm concentrating in construction law and employment law. The firm represents the interests of employers and business owners in a wide range of disputes, including DOL investigations, discrimination claims, and state and federal wage litigation. Mr. Loren can be reached at [email protected] or 561-615-5701.
