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Labor and Employment Alert: Is your business ready for summer interns?

With summer fast approaching, it’s a frequently asked question: “Do we have to pay an intern?” To determine the answer, employers must be sure to review the applicable wage and hour laws that govern the use of unpaid interns, such as the Fair Labor Standards Act (FLSA).

The FLSA defines the term “employ” very broadly as including to “suffer or permit to work.” Accordingly, individuals who are “suffered or permitted” to work must be compensated under the law for the services they perform for an employer. Thus, whether or not an internship in the “for-profit” private sector will require compensation, is determined by whether the intern is considered an “employee” under the FLSA. 

Concerned about the growing number of unpaid internships at for-profit companies and the type of work performed by “interns” at those companies, the U.S. Department of Labor (DOL) took a hard line position on the question of who was and was not an intern. The DOL announced a “crackdown” on unpaid internships which led some employers to cancel their internship programs altogether — even when the internship met the DOL’s criteria. As a result of employer reaction, the DOL issued a Fact Sheet that employers can use to determine whether their internship program meets the DOL’s criteria for paid and unpaid internships.

The DOL has adopted a six-factor test to assist employers in determining whether interns qualify as employees under the FLSA and, therefore, must be paid minimum wage and overtime compensation. Interns are not considered employees under the FLSA if:

  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 completion of the internship.
  6. The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

Employers planning to use summer interns should review the DOL’s Fact Sheet to ensure that their interns are properly classified, as unpaid internships continue to be the subject of DOL scrutiny, providing fodder for litigants eager to claim that a wage and hour violation occurred due to use of “free labor.” Indeed, over the past year there have been a flurry of high-profile lawsuits against companies like Harper’s Bazaar, Fox Searchlight Pictures and most recently the television program “Charlie Rose” — all filed by former unpaid interns who claim that they performed the work responsibilities of paid employees and should have been entitled to fair compensation.

McDonald Hopkins counsels and advocates on behalf of clients in labor and employment matters. If you have any questions regarding wage and hour compliance under the FLSA or state laws, please contact:

James J. Boutrous II
248.220.1355
jboutrous@mcdonaldhopkins.com

Nicole J. Gray
216.348.5418
ngray@mcdonaldhopkins.com

Candace D. Randle
248.220.1338
crandle@mcdonaldhopkins.com

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© 2012 McDonald Hopkins LLC All Rights Reserved. This Alert is designed to provide current information for our clients, friends and their advisors regarding important legal developments. The foregoing discussion is general information rather than specific legal advice. Because it is necessary to apply legal principles to specific facts, always consult your legal advisor before using this discussion as a basis for a specific action.