Internships have been receiving special attention lately with the popular Robert Di Nero movie The Intern and a lawsuit brought against Fox Searchlight Pictures by former unpaid interns claiming compensation. Against this backdrop of entertainment and law, what is an internship? What are the expectations legally and from a work perspective?
What is an internship program?
The National Association of Colleges & Employers explains that an internship is a form of “experiential learning that integrates knowledge and theory learned in the classroom with practical application and skills development in a professional setting.”
Internship programs take on a variety of forms and are found in both the private and public sector. Google offers technical and product management internships. The United States Department of Agriculture has a number of internship programs exposing students to agricultural careers. There is also the J-1 Visa Exchange Visitor Program, an internship program designed to allow foreign college and university students or recent graduates to come to the United States to gain exposure to U.S. culture and receive hands-on experience in U.S. business practices in a chosen occupational field. Internships for the J-1 Program are offered in a number of occupational categories to include agriculture, forestry and fishing. J-1 Visa holders cannot work in unskilled or casual labor positions; positions that require childcare or elder care; or positions that require more than 20% clerical or office support work.
Developing an Internship Program
In developing an internship program, there should be two focuses. The first should be on the who, what and why of the internship program, namely the formulation of something more than a program for someone to run the copy machine or make the daily mail run. The second focus should be on the potential legal ramifications of an internship program.
With respect to the first consideration, when embarking on an internship program, a business should consider the reason(s) for the internship program; what its expectations are for the internship program; and, how the internship program will operate. These considerations are no different from other day-to-day staffing considerations and developments undertaken by a business. The internship program should at the very least provide: (1) defined objectives for the intern; (2) projects for the intern; (3) performance criteria for the intern; and (4) supervision / mentoring / for the intern.
Legal Issues of Internship Program
The legal ramifications of an internship program rest primarily on whether the internship is paid or unpaid.
A paid intern is for the most part is the same as any other business employee and is entitled to the protections of federal and state anti-discrimination laws as well as federal and state labor laws. This generally is not the case for unpaid interns.
Federal law does not extend anti-discrimination protections to unpaid interns, as the anti-discrimination laws apply to employees and by judicial interpretation employees are generally understood to be individuals who are provided compensation. In January 2016, the United States House of Representatives passed a bill that would extend protections to unpaid interns but only those working in the federal government. It is not yet law. There are also pending bills to extend protection to unpaid interns working in the private sector. Until then, though, unpaid interns do not have any remedies if they encounter discrimination based on race, sex, age, religion or on the basis of some other protected status. Six states, though, and the District of Columbia have enacted laws protecting unpaid interns from sexual harassment or discrimination (California, Oregon, Connecticut, New York, Illinois and Maryland.)
The other significant legal issue is whether an intern must be paid. Again, as with laws protecting against discrimination, the Federal Fair Labor Standards Act requirements for minimum wage and overtime, apply only to employees. Whether an intern should or should not be paid has been the subject of guidance published by the United States Department of Labor (DOL) in 2010. This Fact Sheet (Internship Programs Under the Fair Labor Standards Act) lists six factors to be used in determining whether an intern should be paid. Briefly summarized it provides: (1) if the internship experience is more training; (2) benefits the intern; (3) the intern does not displace regular employees; (4) the business does not receive an immediate advantage of the activities of the intern; (5) the intern is not necessarily entitled to a job at the end of the internship; and (6) the intern and business understand the intern is not entitled to wages then the intern is not an employee and the overtime and minimum wage provisions of the FLSA do not apply.
Whether the Department of Labor’s guidance continues to hold sway though, has come into doubt with a January 25, 2016 decision of the United States Court of Appeals for the Second Circuit. (Glatt v. Fox Searchlight Pictures, Inc., 811 F.3d 528 (2nd Cir. 2016)). In its decision, the Court of Appeals rejected the DOL’s request that the Court defer to the test laid out in its Fact Sheet. Instead, the Court said that the “proper question is whether the intern or the employer is the primary beneficiary of the relationship.” The Court set out a non-exhaustive set of considerations to determine the primary beneficiary. These considerations include: (1) the extent to which the intern and the employer clearly understand that there is no expectation of compensation; (2) the extent to which the internship provides training that would be similar to that which would be given in an educational environment; (3) the extent to which the internship is tied to the intern’s formal education program; (4) the extent to which the internship duration is limited to the period in which the internship provides the intern with beneficial learning; (5) the extent to which the intern’s work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern; and (6) the extent to which the intern and the employer understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship.
Within this framework, whether an intern must be paid, involves the weighing and balancing of the circumstances with no one factor dispositive.
At this juncture, the Court of Appeals case is the most current judicial directive on the question of the circumstances under which an intern must be paid trumping the DOL’s guidance which does not carry the weight of law.
In implementing an internship program, it is important that a business construct a comprehensive plan. Having a well thought out internship program in place will assist the employer in determining whether the internship should be a paid internship or an unpaid internship. Paid internships must be paid in accordance with not only federal labor standards but applicable state standards as well. In addition, paid interns – as employees of a business – are entitled to all of the protections of relevant federal and state anti-discrimination laws. While those protections do not extend to unpaid interns except in certain states, businesses should not view the lack of protections over unpaid interns as free license to run roughshod over the intern(s).
This information is general in nature and should not be construed as tax or legal advice.
