Unpaid Summer “Interns” May Expose Employers to Liability

| May 7, 2012 | Fair Labor Standards Act |

The summer is a time when many students turn to a summer internship to further their career aspirations.  Many employers turn to an unpaid internship program in an effort to both allow students to gain valuable “real world” experience and permit employers to evaluate potential candidates for future positions.  However, even though they are attempting to help students, employers must be cautious that this attempt to help someone does not expose them to liability under the Fair Labor Standards Act (FLSA) or Ohio Minimum Wage law. 

The FLSA contains a broad definition of “employ” to include to “suffer or permit to work” making the FLSA requirements apply to most workers.  Covered and non-exempt individuals who are “suffered or permitted” to work must be compensated under the FLSA for the services they perform for an employer.  As an exception, the U.S. Supreme Court has held that the term “suffer or permit to work” cannot be interpreted to make a person whose work serves only his or her own interest be considered an employee of another who provides the aid or instruction.  Therefore, interns may not be considered as suffering or permitting to work and instead be considered a “trainee” under the Act.

The determination of whether an internship meets the trainee exclusion depends upon all of the facts and circumstances of each case.  The following six criteria must be applied when making the determination of whether someone qualifies as trainee:

(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.

Employers must be cautious as under the Fair Labor Standards Act it is impermissible for an individual to simply volunteer his or her services to a for-profit employer in the private section.  Individuals are unable to simply waive this right to payment by agreement.  A separate exemption is recognized for individuals who volunteer their time, freely and without anticipation of compensation for religious, charitable, civic, or humanitarian purposes to non-profit organizations.  Employers should review any unpaid internship program with their employment counsel to avoid potential pitfalls.

By: Justin A. Morocco

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