Monday, July 21, 2008

Gowder on Unpaid Internships and the FLSA

Moneychanginghands Good commentary by Paul Gowder on the Uncommon Priors blog on why unpaid internships required for some jobs may violate the Fair Labor Standards Act (FLSA):

I’ve complained before about the gross injustice of making many jobs conditional on a long period of unpaid internships. The short version is that they shift the costs of on-the-job training that have always been borne by employers onto employees, and do so in a terrible fashion — there are ordinarily no “student loans” for unpaid internships, no pell grants for low-income interns* — either you can afford to work for free, or you can’t. This is a disaster for the economic mobility on which the U.S.** prides itself: as this trend increases, whole careers will become entirely closed off to the poor.***

It may also be illegal. The Department of Labor says the following about unpaid internships and FLSA . . . .

Based on Portland Terminal, the Wage and Hour Division (WHD) has developed six factors to evaluate whether a trainee, intern, extern, apprentice, graduate assistant, or similar individual is to be considered an employee. If all of the following six factors are met, then an employment relationship does not exist:

       1. The training is similar to what would be given in a vocational school or academic       educational instruction;
       2. The training is for the benefit of the trainees or students;
       3. The trainees or students do not displace regular employees, but work under their close observation;
       4. The employer that provides the training derives no immediate advantage from the activities of the trainees or students, and on occasion the employer’s operations may actually be impeded;
       5. The trainees or students are not necessarily entitled to a job at the conclusion of the training period; and
       6. The employer and the trainees or students understand that the trainees or students are not entitled to wages for the time spent in training.

    See Wage and Hour Opinion Letter May 17, 2004 . . . .  In the typical externship or internship program, where the work activities are simply an extension of the student’s academic program, these factors often are met and an employer-employee relationship does not exist. If no employment relationship exists, the provisions of the FLSA do not apply . . . .

Now consider the following advertisements for unpaid interns in the NYC media industry . . . .

    “Men’s Vogue is looking for an editorial intern for the spring semester. The internship must count for credit, and interns would be asked to work 2 full days a week. Internship opportunities and responsibilities include: writing original content for our website; scouting theater, music, film, art, and book releases; researching potential story ideas for editors; and some administrative tasks.”

Now look at standards ##1-4 again. Particularly, look at #4. Can anyone say in good faith that interns who actually write content for magazines, or do factchecking, copyediting, or “some administrative tasks” aren’t directly contributing to the bottom line of the business?

So. Can you?

Hat Tip: Dana Nguyen

PS

https://lawprofessors.typepad.com/laborprof_blog/2008/07/gowder-on-unpai.html

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Comments

I think you're right about the intern position advertised. It wouldn't meet the Portland Terminal standard. However, I think what this really shows are the problems in the Portland Terminal standard, not the intern job. The fourth prong of the test is nearly impossible to overcome. I'm not sure the "typical externship or internship program" is "simply an extension of the student’s academic program." I can't think of any intern/extern scenario that will not benefit the company in some way - outside of the company just hiring a professor and simply teaching a course on premises. The DOL got hung up on this very point in the 5/17/04 Op. Letter. The whole point of an internship is to gain a practical understanding of an industry. It's hard to do that without actually "working for" the company.

As for policy concerns, there are strong policy reasons in favor of internship programs like the one in your example. The position is for length of the semester, and must count for credit for the student to be considered. This alleviates Mr. Gowder's fear that the student could not receive aid for the work, since whatever credits are given for the internship will be counted towards the student's ability to get both federal and private loans. Plus, many small- and mid-sized companies would be hard-pressed to offer college internships if they were required to pay the students, work out FICA, potentially alter their ERISA figures, etc.

Obviously, a summer-long or year-round internship that is unpaid and completely inured to the benefit of the corporation (i.e., no school credit, etc.) is a problem, but so is obligating employers to devise purely educational programs at their own expense without hope of gaining any benefit.

Posted by: Tim Eavenson | Jul 22, 2008 1:33:44 PM

I have to agree with Tim, particularly on the last point. Given the trend over the last few decades, cutting benefits to employees including pensions, health care, etc., it's hard to imagine employers going along with #4. Even if you could find a significant chunk of employers who would agree not to "derives no immediate advantage" from the use of interns, I don't think many would go for "operations...actually impeded."

In fact, wouldn't a company that agreed to such a condition be ignoring its fiduciary duty to shareholders? So publicly-traded companies could never use interns? And small companies? What about attorneys who are solo practitioners and students who want to know what it might be like to work on their own after graduation? "Yes, law school intern placement person? I'd like to have an intern come in who might actually impede my operations. Malpractice insurance? Sure I've got some. Why?"

Posted by: Rick Horowitz | Jul 23, 2008 2:15:22 PM

DELIGHTED to see this issue getting some attention!

If anyone is interested in a longer analysis of the student intern/employee issue, I will immodestly point to a piece I wrote a few years back, David C. Yamada, The Employment Law Rights of Student Interns, 35 Connecticut Law Review 215 (2002). It explores FLSA issues as well as related problems with discrimination law.

Posted by: David Yamada | Jul 25, 2008 12:34:49 PM

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Posted by: webmaster | Sep 26, 2008 12:33:56 AM

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