DOL Provides Guidance On When Private, For-Profit Employers May Use Unpaid Interns Under The FLSA

DOL Provides Guidance On When Private, For-Profit Employers May Use Unpaid Interns Under The FLSA

The Department of Labor (“DOL”) recently issued a Fact Sheet detailing the limited circumstances under which private, for-profit employers may use interns without the internship being deemed “employment” such that the employer would be required to pay the interns minimum wage and overtime under the Fair Labor Standards Act (“FLSA”). The Fact Sheet makes clear that the DOL means to construe the FLSA as broadly as possible to find an employment relationship and strictly limit the use of unpaid interns in the private sector.

According to the DOL, interns are not “employed” when they receive training for their own benefit, as determined by certain specified criteria. To avoid an employment relationship, the DOL requires employers to demonstrate:

(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 should note that they must satisfy all six factors if they are to avoid an employment relationship and use unpaid interns. Generally speaking, the more the internship program is structured around or operated in conjunction with an academic curriculum, the more likely the internship will pass muster with the DOL.

With the downturn in the economy, more students and even experienced job applicants are willing to serve in unpaid capacities to get in the door. Private employers must be wary of this arrangement, however, as the misuse of “unpaid interns” could lead to lawsuits resulting in awards of back pay and possible liquidated damages. Such employment practices could also trigger a DOL investigation into the employer’s general payroll practices and exemption classifications, which could lead to further costly complications. Accordingly, employers should monitor any internship programs carefully to ensure compliance with the criteria used by the DOL.