Thanks to the new leadership at the U.S. Department of Labor, it is now much easier for employers to use unpaid interns without running the risk of breaking federal wage laws.
The Obama-era Labor Department had adopted standards that virtually wiped out the use of unpaid interns in both businesses and non-profit groups.
DOL was reacting to a wave of lawsuits filed by attorneys on behalf of interns asserting violations of hour and wage laws.
In recent years high-profile lawsuits were filed by unpaid interns against TV commentator Charlie Rose, famous fashion designers Donna Karan and Norma Kamali, the production company that filmed the movie “Black Swan,” and magazines such as Outside, Harper's Bazaar, Cosmopolitan Vogue, Vanity Fair, The New Yorker and Good Housekeeping.
In 2010, the Labor Department adopted a six-part list of criteria to be applied when judging whether an unpaid internship would be permissible. It emphasized that internships would be viewed as legal employment unless the employer could prove all six of the required criteria were met.
The new DOL “Fact Sheet” issued in January pulls back from the extreme position taken previously and provides new guidance for employers.
Under this new regime, DOL expects employers to consider and weigh the seven factors that cover the extent to which:
- The intern and the employer clearly understand that there is no expectation of compensation. Any promise of compensation, expressed or implied, suggests that the intern is an employee – and vice versa.
- Whether the internship provides training that would be similar to that which would be given in an educational environment, including the clinical and
other hands-on training provided by educational institutions. - If the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit.
- The internship accommodates the intern’s academic commitments by corresponding to the academic calendar.
- The internship’s duration is limited to the period in which the internship provides the intern with beneficial learning.
- The intern’s work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern.
- The intern and the employer understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship.”
“DOL’s new test makes it easier to create unpaid internship programs that are lawful under federal law as long as the answers to the seven questions show that -- on balance -- the intern or student benefits more from the relationship than the employer does,” says attorney James M. Paul of the Ogletree Deakins law firm.
In order to ace the test, a business will want to attempt to structure its program so that all seven factors lean toward an internship rather than an employer-employee relationship, he stresses.
In addition, achieving a passing grade under this test “absolutely requires implementation of clear policies, forms, and agreements for the internship program,” Paul says.
Employers also should note that they need to confirm that their internship programs comply with all applicable state and local requirements, which as we have seen in other areas of labor management, can be stricter than federal requirements.