Employers in San Diego and across the country are being flooded with interns this summer looking for work experience and that first “foot in the door” in competitive industries. For many interns and employers, payment tends to come in the form of academic credit or “life experience.” Few question this long-established practice. However, is it legal under federal or state wage and hour laws, or does the title of “intern” bestow upon it an exception?
Many employers and interns are unaware that the intern-employer relationship is actually governed by federal and state wage and hour law. In most cases, an intern is actually an employee and therefore most interns are actually entitled to minimum wage and overtime (if applicable). This relationship is principally governed by the federal Fair Labor Standards Act.
The Department of Justice has established a test for employers to use to determine whether an intern is actually an employee under the FLSA, and therefore entitled to wages. The test asks employers whether the internship is similar to training in an academic environment and for the benefit of the intern; whether the intern is engaged in productive work that furthers the employer’s operations; and whether there is an expectation of future employment or payment. In the end, it boils down to the following question: Is the intern engaged in any productive work for the employer?
If the employer derives any benefit from the intern, whether filing, running errands, answering phones or any other typical “intern” work, the intern will be considered an employee who is entitled to wages and overtime. Only if an internship is merely in an observational, job-shadowing capacity will an intern be able to be unpaid. The easiest way for an employer to determine where its interns fall on the spectrum is to determine whether, if the intern were not there, the employer would have to hire another employee to complete the intern’s tasks, or have existing staff perform the tasks. If either is the case, the intern will be considered an employee. Internship-to-hire programs are especially considered suspect – if an intern is eligible to be hired full-time at the successful conclusion of an unpaid internship, the internship will most likely be considered a probationary employment period, during which the intern is entitled to pay.
Courts are giving internships strict scrutiny. Most famously, in 2013 a federal judge in New York ruled that interns working for the film “Black Swan” who brought a class-action against the film’s production companies were actually employees entitled to wages, overtime, and back pay. Other class actions are working their way through the courts against publishers, universities, and other large companies.
If your summer interns have been unpaid improperly, there is still time to fix the situation. The most conservative approach, and the best way for an employer to shield itself against claims from interns, is to pay all interns at least the minimum wage (plus overtime if applicable). Otherwise, you may be at risk of owing such wages, plus various civil penalties and potentially attorneys’ fees, costs and interest if the intern performs any productive work throughout the course of the internship. So keep cool this summer by testing whether you really have interns or employees.
-Submitted by Brooke Tabshouri, an attorney with Fisher & Phillips LLP, a labor and employment law firm focused on helping employers with workplace legal issues. She can be reached at email@example.com or (858) 597-9615.