Interns May Have to be Paid by Law
The Fair Labor Standards Act requires that employees be paid at least the federal minimum wage of $7.70 per hour and, in most cases, time and one-half the employee’s regular rate of pay for all hours worked in excess of 40 per week. In the state of Ohio, minimum wage for employers grossing $283,000 or less is $7.25 per hour. Student interns could be employees under the law and, therefore, subject to FLSA provisions, depending upon their work activities and workplace circumstances. Employers should review the law to ensure that they are in compliance with the law.
Because FLSA’s definition of employee is broad, excluded persons must be quite narrow. According to the U.S. Department of Labor’s Wage and Hour Division, the fact that an employer labels a worker as an intern or trainee does not necessarily exempt that worker from legal wage and hour mandates. Likewise, an employee doesn't’t become a volunteer and exempt from FLSA just because an employer says so or because an employer represents a religious, public service or non-profit organization.
To help employers determine whether an intern, extern, trainee, apprentice or similar individual is to be considered an employee for purposes of wage and hour laws, the federal division developed a six-point test that is rooted in a 1947 Supreme Court decision:
1. The training, even though it includes actual operation of the facilities of the employer, is similar to what would be given in a vocational school or academic educational instruction;
2. The training is for the benefit of the trainees or students;
3. The trainees or students do not displace regular employees, but work under their close observation;
4. The employer that provides the training derives no immediate advantage from the activities of the trainees or students and, on occasion, the employer’s operations may actually be impeded;
5. The trainees or students are not necessarily entitled to a job at the conclusion of the training period; and
6. The employer and the trainees or students understand that the trainees or students are not entitled to wages for the time spent in training.
An employment relationship does not exist under the FLSA and the FLSA’s minimum wage and overtime provisions do not apply unless all of the factors are met. It might seem that many internships would require wages, but accurately evaluating internship programs according to the six-point test is difficult.
The federal division has noted that the above factors usually are met and an employer-employee relationship does not exist in internship programs where work activities are an extension of the student’s academic program. But even the Wage and Hour Division has had difficulty conclusively determining whether certain unpaid internship programs meet the six-point test, according to the Washington-based Economic Policy Institute. Where situations are unclear, the division weighs whether the work performed by the intern would “offset the burden presented to the employer from the necessary training and supervision” and if the experience “provides the students with educational experiences unobtainable in a classroom setting.” Should the internship meet either of these criteria, the Wage and Hours Decision determined that interns would be unlikely to qualify as a FLSA “employee.”
“In addition, the U.S. courts of appeals are divided as to whether an employer must satisfy all six tests to avoid an employment relationship with an intern or trainee, or may fail on one or more points if the totality of the circumstances nevertheless establishes that the intern is not an employee,” the Economic Policy Institute reported.
Generally, an employer’s internship program should be centered more on teaching students than on getting the students to perform specific daily tasks that the employer needs, the Wage and Hour Division says. The employer’s internship program should strive to provide students with skills that can be used in multiple employment settings rather than focusing on a just those skills the one employer needs. The division also says that if the intern receives the same level of supervision as employees, (which is generally less than is required for a novice) this would suggest an employment relationship.
Besides the possible legal requirements, employers might consider that many UD students must work to pay for college. Students who seek – or are required by employers to get – academic credit for internships also must pay tuition for those credit hours. So, unpaid internships for credit are costly to students.
Some area employers have reported that they get a deeper applicant pool if the position offers wages or a stipend, improving the organization’s chances of getting a top-notch intern. Students who are paid for internship and can avoid seeking a second, paying job also can focus more of their attention on their internship work.
Some Dayton-area institutions have found other ways to lessen students’ financial impacts through stipends, transportation costs, free meals, and/or in-kind services.
An April 2010 New York Times story reported that state and federal authorities were becoming more interested in employers who evade the law. The Washington-based Economic Policy Institute, in a position paper, proposed a new regulatory test for determining whether or not interns must be compensated.