Wage and Hour Law Update : Wage & Hour Lawyer & Attorney : Jackson Lewis Law Firm : Minimum Wage, Overtime & Service Contracts

Subsequent to our post of April 6, the California DLSE issued a lengthy new opinion letter regarding trainees, available here. In it, the Division upholds the uncompensated “intern” status of participants in the Year Up program, a program in which a not-for-profit places 18-24 year olds in underserved communities to develop marketable skills in the information technology arena for 6 month assignments. The Division applied the six factor conjunctive test utilized under federal law in reaching its conclusion:

1)  The training, even though it includes actual operation of the facilities of the employer, is similar to that which would be given in a vocational school;

2)  The training is for the benefit of the trainee

3)  The trainees do not displace regular employees, but work under close observation

4)  The employer that provides the training derives no immediate advantage from the activities of the trainees and on occasion his operations may actually be impeded

5)  The trainees are not necessarily entitled to a job at the completion of the training period

6)  The employer and the trainees understand that the trainees are not entitled to wages for the time spent in training.

See, e.g., Reich v. Parker Fire Protection Dist., 992 F.2d 1023, 1026 (10th Cir. 1993).

The opinion letter departs from the DLSE’s more expansive eleven-factor test, which included the additional factors below, observing that they “do not appear to be based upon any source statute or regulation from which they derive nor are the additional factors identified with specific case law.”

7)       Any clinical training is part of an educational curriculum;

8)       the trainees or students do not receive employee benefits;

9)       the training is general, so as to qualify the trainees or students for work in any similar business, rather than designed specifically for a job with the employer offering the program, i.e. upon completion of the program, the trainees or students must not be fully trained to work specifically for only the employer offering the program;

10)   the screening process for the program is not the same as for employment, and does not appear to be for that purpose, but involves only criteria relevant for admission to an independent educational program, and

11)   advertisements for the program are couched clearly in terms of education or training, rather than employment, although the employer may indicate that qualified graduates will be considered for employment.

While the DLSE’s willingness to abandon these supplemental factors is an encouraging sign, the difficulty of satisfying the original six-factor test remains. Few internship programs, whether offered through the not-for-profit sector or otherwise, are as fully compliant with the prevailing federal test as that offered by Year Up.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

For years, students and recent graduates have accepted internships with employers to gain work and practical experience.   Many, if not most, employers have treated and continue to treat these internships as “unpaid.” What’s more, in many industries (including film and advertising) this practice is an institutional rite of passage – part of “dues paying”.  Recent actions and pronouncements by representatives of the federal and various state departments of labor require employers to review their practices to ensure that good intentions (or professional rites of passage) are not leading to wage and hour liability. 

Technically, under the FLSA, there is no such thing as an “intern.”  In general, in order for an employer to avoid any minimum wage obligations an individual must be a “volunteer” or a “trainee”.  Since volunteers generally are not recognized in the for-profit sector, the utility of that classification is limited.   Thus interns, if they are to be unpaid, most likely must be “trainees” for FLSA purposes. In order to determine if an individual is a “trainee” exempt from minimum wage, the following six factors generally must be satisfied. 

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;

3.      The trainees 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, and on occasion the employer’s operations may actually be impeded;

5.      The trainees are not necessarily entitled to a job at the conclusion of the training period; and

6.      The employer and the trainees understand that the trainees are not entitled to wages for the time spent in training.

The rub is that in many instances the intern is performing productive work that would normally be performed by a paid employee. In such a situation, even if the intern is receiving school credit, minimum wage is due under the FLSA.  In fact, per Nancy J. Leppink, the acting director of the USDOL’s Wage and Hour Division: ““If you’re a for-profit employer or you want to pursue an internship with a for-profit employer, there aren’t going to be many circumstances where you can have an internship and not be paid and still be in compliance with the law.”   It is also vital for those with internship programs to note that M. Patricia Smith, the Solicitor of Labor responsible for coordinating the Wage and Hour Division, initiated investigations against several businesses for their use of interns during her tenure as New York Commissioner of Labor.

As always, state law also must be considered.  While many states track the FLSA standard, there are various differentiations particularly relevant to multi-state employers.   For example, in New York, if an individual is receiving school credit, the individual generally is exempt from minimum wage payment obligations under state law.

What is the takeaway?  Businesses need to analyze exactly what the intern will do during the internship.  If the intern’s time will be spent primarily on productive work that would normally be performed by another employee, the business should consider paying the intern minimum wage to avoid any trailing legal issues.

• Email This
• Print
• Comments (3)
• Trackbacks
• Share Link