Steering Clear of the Fine Line Between Labor and Learning

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By Christine Pulfrey  

The line between employment and training may be blurred if interns perform productive work or if they are engaged in key operations.

Many employers take on summer interns to fill vacation-reduced staffs. If an employer benefited from the interns' work, then interns deriving benefits from improved work habits or new skills would not be enough to exclude them from Fair Labor Standards Act coverage.

The more an internship is structured as an academic experience rather than a business operation, the more likely it will qualify as an extension of an individual's education and not compensable employment.

When a college or university oversees an internship program and academic credit is given for participation, this likely would qualify as an unpaid internship, the Labor Department said. In addition, providing skills applicable in multiple employment settings rather than those specific to a particular employer's operation could be viewed as training excludable from FLSA pay provisions.

Key Factors Affecting Internships

Employers may employ interns in paid or unpaid positions. Generally, interns are subject to FLSA wage and overtime requirements, but employers may treat interns as exempt employees if they fulfill certain criteria.

A Labor Department fact sheet narrowly frames the exclusion for those in internships or training programs in the for-profit private sector. Individuals may participate in such programs without compensation only under these circumstances:

• The internship, even though it takes place at the employer's facilities, is similar to training that would be given in an educational environment.

• The internship experience is for the benefit of the intern.

• The intern works under close supervision of existing staff but does not displace regular employees.

• The employer providing the training derives no immediate advantage from intern activities, and its operations may be impeded.

• The intern is not necessarily entitled to a job after the internship.

• The employer and the intern understand that the intern is not entitled to wages during the internship.

 

An employment relationship, with FLSA minimum wage and overtime protections, does not exist only if all six of these criteria are met.


Internships structured as academic experiences may avoid misclassification lawsuits.  

 


In a Sept. 12, 2013, letter to the American Bar Association, the Labor Department said that the FLSA does not require law firms to pay law student interns who only work on charitable matters.

Although the FLSA generally does not allow people to volunteer their services to for-profit businesses, under specific circumstances law school students can perform unpaid internships with for-profit law firms, the department said. “In contrast, a law student would be considered an employee subject to the FLSA where he or she works on fee-generating matters, performs routine nonsubstantive work that could be performed by a paralegal, receives minimal supervision and guidance from the firm's licensed attorneys or displaces regular employees,” including support staff, it said.

Courts Weigh Workplace Roles

Several recent court cases regarding whether work in the modeling, film and publishing sectors qualified as internships or as employment depended on whether the characteristics of the work experience met the six-factor internship test or whether misclassification had occurred.

A $450,000 preliminary settlement recently reached between a modeling agency and 123 unpaid interns who claimed the agency willfully misclassified them as exempt from state and federal wage and hour laws received preliminary approval by a federal district court (Davenport v. Elite Model Mgmt. Corp., 2014 BL 7534, S.D.N.Y., No. 1:13-cv-01061, preliminary approval granted 1/9/14). The interns claimed that the agency misclassified them to avoid paying regular and overtime wages for work completed during their month of employment around an annual fall fashion week. A final approval hearing is to be held May 1.

In another case, a ruling that a film company's unpaid interns were FLSA employees entitled to conditional certification of a collective action under the FLSA and class certification under New York labor laws is to be reviewed (Glatt v. Fox Searchlight Pictures, 2013 BL 251516, S.D.N.Y., No. 1:11-cv-06784, 9/17/13).

The court granted the motion for review after it found a “substantial basis” for disagreement about the status of unpaid interns under federal and state law. The court's analysis of the interns' employee status conflicts with a ruling in a case involving an intern for Hearst publishing company, it said.

In Wang v. Hearst, an intern claimed to have worked up to 55 hours a week with no pay during four months at Harper's Bazaar magazine. She claimed that the employer's misclassification of workers as unpaid interns violated the minimum wage, overtime and recordkeeping provisions of the FLSA and New York law. The court said the interns had not shown that they were employees covered by federal and state laws (Wang v. Hearst Corp,20 WH Cases 2d 1490, 2013 BL 122761 (S.D.N.Y. 2013). The case was appealed.

 


For more information, see PAG's “FLSA Exemptions” chapter.

To contact the reporter on this story: Christine Pulfrey in Washington at cpulfrey@bna.com

To contact the editor responsible for this story: Michael Trimarchi at mtrimarchi@bna.com