Companies seeking to diminish wage and hour liability should be aware of what is quickly becoming "the next big trend" in workplace litigation: lawsuits initiated by unpaid interns and interns making less than the minimum wage in violation of the Fair Labor Standards Act and state law.
These lawsuits should serve as a warning to employers that the initial "bargain" of an unpaid internship can ultimately amount to significant liability in the form of back pay and penalties.
Internships used to be populated exclusively by eager high school and college students seeking valuable work experience. Since the job market contracted, the type of individual seeking an internship has changed drastically, as internships are increasingly sought by adults who have completed their education. According to a recent Pew Charitable Trust study, only 54 percent of those from age 18 to 24 are employed, suggesting that internships have been replacing paid, entry-level jobs.
In response to these developments, the U.S. Department of Labor issued the following guidelines, each of which must be satisfied for an internship to qualify as unpaid:
• The internship must be similar to training given in an educational environment.
• It must be primarily for the benefit of the intern, as opposed to the business.
• The unpaid positions must not displace regular employees.
• The employer providing the training must not derive any immediate advantage (and occasionally its operation may be impeded by it).
• There is no guarantee of a job at its conclusion.
• And, finally, the intern understands that there is no entitlement to wages.
Contrary to popular belief, whether or not an intern receives school credit has no direct bearing on whether the internship must be paid. Companies considering implementing an unpaid internship program should do so with an eye toward satisfying the federal criteria, as well as any applicable state laws.
-- Elizabeth Stroyd Windsor
Morgan Lewis & Bockius
Business Workshop is a weekly feature from local experts offering tidbits on matters affecting business. To contribute, contact Business Editor Brian Hyslop at email@example.com.