Legal Brief: When Does An Unpaid Internship Become Employment?
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Given the university’s role in requiring, recommending and promoting student internships, it is important to recognize and understand the unique issues involved with unpaid student internships with for-profit companies. This article is the first of a series discussing the use of academic internships outside of the classroom to meet programmatic requirements.
Unpaid internships with for-profit companies made national headlines this past summer as a result of a federal court opinion concerning two unpaid interns who worked on the production of the film Black Swan. The interns in Black Swan alleged that Fox Searchlight Pictures failed to pay them in violation of the Fair Labor Standards Act (FLSA) and New York’s wage laws. The federal court concluded that, due to the nature of the work that the interns performed during production of the movie, the “interns” were actually employees entitled to compensation for the work they performed.
Black Swan, and several other cases that have followed, highlight the need for increased attention to the FLSA’s definition of “employ,” and the U.S. Department of Labor’s (DOL) guidance on whether an intern must be paid for services provided for “for-profit” employers under the FLSA. Interns in the “for-profit” private sector who qualify as employees due to the work they are performing must be paid at least minimum wage and overtime compensation.
Note first that college credit for an unpaid internship is not the sole determining factor in differentiating an internship from employment. Instead, the DOL has provided the following six-factor test as authoritative guidance used to make a determination as to whether an unpaid internship falls within an exception to the FLSA’s employment requirements. If all of the factors listed below are met, an employment relationship does not exist under the FLSA, and the Act’s minimum wage and overtime provisions do not apply to the intern:
- 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;
- The internship experience is for the benefit of the intern;
- The intern does not displace regular employees, but works under close supervision of existing staff;
- The employer that provides the training derives no immediate advantage from the activities of the intern, and on occasion its operation may actually be impeded;
- The intern is not necessarily entitled to a job at the conclusion of the internship; and
- The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.
Generally, the more an academic internship is structured around a curriculum-based experience and/or program, the more likely the internship will be viewed as an extension of the student’s educational experience. Conversely, if the intern is engaged in the day-to-day duties and operations of the employer or is performing productive work that is the same or similar to the work of its employee, then they will not likely be excluded from the FLSA’s minimum wage and overtime requirements. Further, an experience that teaches general skills used across an industry will be viewed more favorably than one that teaches skills particular to one company.
As recent cases have indicated, there is the need for increased academic rigor, oversight and understanding regarding unpaid internships with for-profit companies. Understanding the issues involved with these internships will help to define the educational benefits and expectations of the internship on behalf of the student and employer, and accordingly, may serve to avoid unnecessary future litigation. For additional guidance on this issue, please see the DOL’s Fact Sheet #71: Internship Programs Under the Fair Labor Standards Act at www.dol.gov/whd/regs/compliance/whdfs71.pdf. You may also contact the Office of General Counsel at 330-672-2982 for guidance.