Labor & Employment Law

Unpaid Internships May Be A Problem: Are They Employees Or Not?

By Mark Tabakman

There is a fine line oftentimes between who is and who is not an employee. This premise especially applies to the issue of 'interns.'  As summer approaches, and as jobs may be quite hard for young people to find, there seems to be a rise and we expect to see a sharp rise in companies utilizing unpaid 'interns.'  Under the Fair Labor Standards Act ('FLSA') and state laws, there are definite, specific criteria that a person must fit before they can be deemed an intern and not entitled to (at least) the minimum wage protections of wage-hour laws.

The fear is that employers may view these people as a source of free labor, while using the moniker 'intern' to describe them and hopefully not be able to pay them anything.  For example, in New Jersey, there are nine criteria for delineating an intern; the employer must ensure that all nine are met or else the person is an employee.  Under the FLSA, there are six.  Of special note is the requirement that the internship be for the primary benefit of the individual, not the employer.  This may often be a hazy line to draw.

The state DOLs are on to this.  Last year, the New York State DOL investigated many companies' intern programs to determine compliance with the law.  We are hearing that, on a federal level, there will be more inspections and audits on this issue.  One possible hindrance to these investigations may be the hesitancy of 'interns' to come forward and file complaints, as they understand that such complaints might have the untoward effect of endangering future employment opportunities with the company they just turned in.  Although this would be clearly against the law, i.e. retaliation, this is the real world.

Other criteria that probably cut across every state statute/regulation that has addressed this issue are that the internship must be similar to the training given in a vocational school or academic institution and the intern cannot displace any regular, i.e. . paid workers.  Nor can the employer derive any immediate benefit from the 'work' of the intern.
 

Remember-if the DOL comes in on this issue, it will not limit itself to an examination of only this issue.  Every other compensation practice will be fair game for scrutiny.

Full post as published by Wage & Hour - Development & Highlights on April 16, 2010 (boomark / email).