Adult Internships

The current economic downturn and the resulting loss of jobs has many individuals seeking alternative employment. For some, this may mean simply looking for new work in the same industry. But for others, a new job may require changing careers altogether. As a result, some people are seeking unpaid internships to obtain on-the-job training in a new industry as a way of making themselves competitive in the job market. While employers may welcome this new trend, it is important to be aware that there are federal regulations governing whether an intern must be paid in accordance with the wage and hour laws that apply to employees of your company. This article briefly examines the applicable test, and discusses some practical tips that may enhance the likelihood that your company's program will pass regulatory muster.

Applicable Test

The Wage and Hour Division of the United States Department of Labor (“DOL”) and the federal courts analyze the question of whether an intern is an “employee” for purposes of the Fair Labor Standards Act against the backdrop of a six-factor test which reads as follows:

• Whether the training is similar to that which would be given in a vocational school;
• Whether the training is primarily for the benefit of the intern;
• Whether the intern does not displace regular employees, but instead works under their close observation;
• Whether the company derives immediate advantages from the activities of the intern, and whether on occasion its operations might actually be impeded;
• Whether the intern is necessarily entitled to a job at the conclusion of the training period; and
• Whether the company and the interns understand that the interns are not entitled to wages for the time spent in training.

Although the DOL has taken the position that all six of the above criteria must be met for an individual to be considered a trainee, at least one court has concluded that the determination should be based upon the “totality of the circumstances” even if all six factors are not satisfied. Given the DOL's position on the matter, it would be prudent to strive for compliance with all six criteria if at all possible.

Compliance Tips

The following are tips for maximizing the likelihood that your adult interns will not be considered “employees” for purposes of the six-part test set forth above:

Training Similar to Vocational School

To the extent the intern receives training on the nature of your business or in the types of skills or intellectual prerequisites for success in your field, it will enhance the likelihood that you will satisfy this criterion. Unlike student interns who perform the internship in conjunction with an academic program, most adult interns are seeking specific training in order to become more competitive in the job market. Therefore, employers should be vigilant in ensuring that the intern is not solely performing basic clerical work ' such as answering phones and handling mail ' this would not be characteristic of vocational school training.

Training for the Benefit of Intern

There must be some indication that the intern is benefiting from the program, in terms of training, exposure to the industry, and contacts for potential job opportunities. The focus of the internship should not be upon the free labor that the intern is providing. Rather, it should be upon the benefit of training to the intern. This component is particularly important with respect to adult interns because, unlike student interns, they are not receiving the benefit of academic credit in exchange for their service. It may be prudent for employers to discuss the type of training that the intern is seeking at the start of the internship and monitor the internship to be sure the intern receives appropriate training.

Interns Do Not Displace Regular Employees, But Work Under Their Close Observation

In a difficult economy, employers may be tempted to use interns in lieu of hiring additional employees or paying existing employees overtime when workload increases. However, employers may not use interns to displace current employees or to avoid hiring additional employees.To the extent the intern is involved with tasks such as answering phones, handling or delivering mail, and other clerical activities, it could be perceived as lightening the workload of existing employees. If the intern is working under someone else's close supervision, who is taking time out from his or her own work to monitor the intern, then displacement is less likely to be found. An individual or individuals should be assigned to observe, or at least periodically monitor, the intern's activities.

The Company Derives No Immediate Advantage from Intern's Activities, and on Occasion Operations May
Actually Be Impeded

This component of the test is similar to items two and three discussed above. To the extent the company is primarily utilizing the interns to get needed work accomplished, it looks like it is deriving an immediate economic advantage from the intern's presence. Instead, to satisfy this component, there should be more of an emphasis upon the training afforded by the company and an indication that the company is committing some of its scarce resources to such training, perhaps to the short-term detriment of the company's operations.

Interns Are Not Necessarily Entitled to a Job at the
Conclusion of Training

Adult interns will likely be hopeful that their internship experience will lead to a position with the company. Understandably, many companies view the internship program as a low risk opportunity to evaluate potential candidates for full-time employment. While it is not impermissible to give consideration to your interns when assessing your employment needs, there should be no guarantee of employment at the end of the internship. This should be clearly communicated to the intern at the commencement of the program.

Interns Understand They Are Not Entitled to Wages

This final part of the test is self-explanatory. The best practice would be to set forth this understanding in a written disclaimer as part of an introductory letter to the intern which describes the nature of the program.

Conclusion

To maximize compliance with the DOL's test and avoid potential misunderstandings, it is best to provide the intern with a written description of the program which emphasizes the benefit to the intern, the training afforded by the program, and the fact that the internship is either unpaid or accompanied by a small stipend to cover expenses. The consequences of a finding of non-compliance by the DOL could be considerable, as your company could end up owing back wages, including possible overtime pay, to all of its interns. Because of the technical nature of the DOL test, it is best to seek the advice of knowledgeable employment counsel when structuring and implementing your company's internship program.

The current economic downturn and the resulting loss of jobs has many individuals seeking alternative employment. For some, this may mean simply looking for new work in the same industry. But for others, a new job may require changing careers altogether. As a result, some people are seeking unpaid internships to obtain on-the-job training in a new industry as a way of making themselves competitive in the job market. While employers may welcome this new trend, it is important to be aware that there are federal regulations governing whether an intern must be paid in accordance with the wage and hour laws that apply to employees of your company. This article briefly examines the applicable test, and discusses some practical tips that may enhance the likelihood that your company's program will pass regulatory muster.

Applicable Test

The Wage and Hour Division of the United States Department of Labor (“DOL”) and the federal courts analyze the question of whether an intern is an “employee” for purposes of the Fair Labor Standards Act against the backdrop of a six-factor test which reads as follows:

• Whether the training is similar to that which would be given in a vocational school;
• Whether the training is primarily for the benefit of the intern;
• Whether the intern does not displace regular employees, but instead works under their close observation;
• Whether the company derives immediate advantages from the activities of the intern, and whether on occasion its operations might actually be impeded;
• Whether the intern is necessarily entitled to a job at the conclusion of the training period; and
• Whether the company and the interns understand that the interns are not entitled to wages for the time spent in training.

Although the DOL has taken the position that all six of the above criteria must be met for an individual to be considered a trainee, at least one court has concluded that the determination should be based upon the “totality of the circumstances” even if all six factors are not satisfied. Given the DOL's position on the matter, it would be prudent to strive for compliance with all six criteria if at all possible.

Compliance Tips

The following are tips for maximizing the likelihood that your adult interns will not be considered “employees” for purposes of the six-part test set forth above:

Training Similar to Vocational School

To the extent the intern receives training on the nature of your business or in the types of skills or intellectual prerequisites for success in your field, it will enhance the likelihood that you will satisfy this criterion. Unlike student interns who perform the internship in conjunction with an academic program, most adult interns are seeking specific training in order to become more competitive in the job market. Therefore, employers should be vigilant in ensuring that the intern is not solely performing basic clerical work ' such as answering phones and handling mail ' this would not be characteristic of vocational school training.

Training for the Benefit of Intern

There must be some indication that the intern is benefiting from the program, in terms of training, exposure to the industry, and contacts for potential job opportunities. The focus of the internship should not be upon the free labor that the intern is providing. Rather, it should be upon the benefit of training to the intern. This component is particularly important with respect to adult interns because, unlike student interns, they are not receiving the benefit of academic credit in exchange for their service. It may be prudent for employers to discuss the type of training that the intern is seeking at the start of the internship and monitor the internship to be sure the intern receives appropriate training.

Interns Do Not Displace Regular Employees, But Work Under Their Close Observation

In a difficult economy, employers may be tempted to use interns in lieu of hiring additional employees or paying existing employees overtime when workload increases. However, employers may not use interns to displace current employees or to avoid hiring additional employees.To the extent the intern is involved with tasks such as answering phones, handling or delivering mail, and other clerical activities, it could be perceived as lightening the workload of existing employees. If the intern is working under someone else's close supervision, who is taking time out from his or her own work to monitor the intern, then displacement is less likely to be found. An individual or individuals should be assigned to observe, or at least periodically monitor, the intern's activities.

The Company Derives No Immediate Advantage from Intern's Activities, and on Occasion Operations May
Actually Be Impeded

This component of the test is similar to items two and three discussed above. To the extent the company is primarily utilizing the interns to get needed work accomplished, it looks like it is deriving an immediate economic advantage from the intern's presence. Instead, to satisfy this component, there should be more of an emphasis upon the training afforded by the company and an indication that the company is committing some of its scarce resources to such training, perhaps to the short-term detriment of the company's operations.

Interns Are Not Necessarily Entitled to a Job at the
Conclusion of Training

Adult interns will likely be hopeful that their internship experience will lead to a position with the company. Understandably, many companies view the internship program as a low risk opportunity to evaluate potential candidates for full-time employment. While it is not impermissible to give consideration to your interns when assessing your employment needs, there should be no guarantee of employment at the end of the internship. This should be clearly communicated to the intern at the commencement of the program.

Interns Understand They Are Not Entitled to Wages

This final part of the test is self-explanatory. The best practice would be to set forth this understanding in a written disclaimer as part of an introductory letter to the intern which describes the nature of the program.

Conclusion

To maximize compliance with the DOL's test and avoid potential misunderstandings, it is best to provide the intern with a written description of the program which emphasizes the benefit to the intern, the training afforded by the program, and the fact that the internship is either unpaid or accompanied by a small stipend to cover expenses. The consequences of a finding of non-compliance by the DOL could be considerable, as your company could end up owing back wages, including possible overtime pay, to all of its interns. Because of the technical nature of the DOL test, it is best to seek the advice of knowledgeable employment counsel when structuring and implementing your company's internship program.