As noted in a recent New York Times article, researchers have found that the number of unpaid internships has risen, likely due to employers' limited ability to provide new paying jobs and students' willingness to gain increasingly hard-to-come-by experience. However, officials from the Department of Labor have indicated that many unpaid internship arrangements violate federal law. Nancy Leppink, Acting Director of the DOL's Wage and Hour Division, stated: "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."
The Division utilizes the following six-factor test to determine whether an individual is an employee or a "trainee" under the Fair Labor Standards Act:
- 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;
- The training is for the benefit of the trainees;
- The trainees do not displace regular employees, but work under their close observation;
- 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;
- The trainees are not necessarily entitled to a job at the conclusion of the training period; and
- The employer and the trainees understand that the trainees are not entitled to wages for the time spent in training.
See Advisory, Training and Employment Guidance Letter No. 12-09. Only if all of the above factors are met may an individual be considered a trainee, in which case he or she is not considered an employee and is not subject to the minimum wage or overtime requirements of the FLSA. Among others, it is often difficult for employers to meet the factor requiring that they derive no immediate advantage from the individual’s work.
Due to the increasing number of unpaid internships, the DOL is ramping up enforcement efforts and educating colleges and students regarding the law. Accordingly, employers offering such positions or thinking about doing so should carefully review the positions to make sure they are in compliance with the FLSA.