Michael Kraft

It used to be that the State of California and the Federal Department of Labor (DOL) had two different legal standards for what makes an unpaid intern, California’s being predictably more stringent. Back around 2010, however, the state chose to go with the federal standards in enforcement.

The feds are still rigorous, using a six-part test to determine whether an intern is an employee or “volunteer” for the purposes of wage and hour laws.

• The training provided, even though it includes actual operation of the facilities of the employer, must be similar to that which would be given in an educational environment.
• The training provided is for the benefit of the trainee, not the employer.
• The trainees work under close supervision but do not displace existing employees.
• 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 completion of the training period.
• The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

Importantly, all six of the DOL guidelines must be followed for an employer to stay within the law when offering an unpaid internship. If any of the criteria are not met, the intern is considered to be an employee and wage and hour laws apply.

Typically, the most difficult criterion to establish is whether the employer derives a benefit from the intern’s activities. Employers should not view unpaid internships as a means to accomplish regular work tasks. If the interns are unpaid, then the emphasis must be on the educational aspect aimed at assisting the intern, not the company. (Remember: all “employees” must be paid minimum wage and overtime pay.)

Other possible issues that arise include:

• Whether interns are considered employees for purposes of workers’ compensation laws.
• Protecting interns from discrimination.
• Whether interns should sign a nondisclosure and/or non-solicit agreement, or any other agreement in light of the fact that the intern may not fully understand what he or she is signing.

Given these complications, before recruiting an intern an employer should develop policy for the organization’s internship program that establishes clear criteria, goals, and objectives for both the interns and the organization. The company should also closely evaluate the proposed activities of each intern and determine whether they fall under “voluntary” or “employee” time as defined by DOL guidelines and other employment laws and regulations.

If building an internship program from scratch, it is highly recommended to consult with an employer organization, HR advisor or labor attorney as an important first step.

The information provided in this blog is intended for general information purposes only. Readers should seek the help of an HR professional for guidance on specific issues.