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Wage And Hour Pop Quiz - "Do I Get Paid For This Or Not?"

August 21, 2014

By Michael G. McClory

Yesterday, I moved my son, John, into his dorm at Syracuse University. Like his freshmen classmates he is getting set for some of the wonders of college – football games, dining halls, and the famous “what’s your major” question. Although classes do not start until Monday, The Bullard Edge is feeling nostalgic and is giving a one-question pop quiz today. Get out your No. 2 pencils (and relax – it’s true or false).

Question:

Emma Learner, a senior electrical engineering student at State University, scored a coveted unpaid internship with Northern Practical Applications, Inc. NoPA is a research company dedicated to hitting the next technological homerun (doubles and triples along the way are ok, too). Ms. Learner will be part of a team (three permanent PhD Researchers and three Interns) that has spent four years investigating whether brain waves may be “harnessed” in some way. (Can brain waves power your car, or your toaster?) Researchers are well-paid with both salary and an interest in the marketable product developed by their team. Interns receive 6 hours of college credit per semester and are graded by the Researchers. NoPA has never extended a job offer to an Intern, but the internship is prestigious and typically helps Interns land first jobs with better than average pay. NoPA’s “no pay” practice is lawful because Ms. Learner receives college credit and her work is graded. True or false?

Pencils down. Before we answer the question, though, The Bullard Edge needs to acknowledge the work of today’s guest artist. My daughter, Annie, age 10, created the illustration at the top of this post. She is our favorite artist.

Answer: False.

While an internship may be unpaid, receiving college credit is not the determining factor. It is a valid factor to consider, among a number of others.

According to the US Department of Labor’s “Fact Sheet #71: Internships Under the Fair Labor Standards Act” (issued in 2010), there are six criteria that must be met for an internship to be unpaid. Where these criteria are not met, an intern in the for-profit private sector will be considered an employee and must be paid at least the minimum wage and overtime compensation.

“The following six criteria must be applied when making this determination:

  1. The internship, even though it includes actual operation of the facilities of the employer, is similar to training which would be given in an educational environment;
  2. The internship experience is for the benefit of the intern;
  3. The intern does not displace regular employees, but works under close supervision of existing staff;
  4. The employer that provides the training derives no immediate advantage from the activities of the intern; and on occasion its operations may actually be impeded;
  5. The intern is not necessarily entitled to a job at the conclusion of the internship; and
  6. The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.”

Applying these criteria to Ms. Learner’s internship is not easy. On the “intern” side, all but number 4 on the criteria list arguably are met. On the “employee” side, though, the internship experience may possibly benefit NoPA as much as Ms. Learner (number 2), NoPA uses interns as part of its research teams (number 3), and NoPA hopes to see an immediate benefit (number 4).

The Fact Sheet discusses these criteria in relation to internships for college credit, but does not provide any bright lines. On the one hand, DOL says that the “more the internship provides the individual with skills that can be used in multiple employment settings, as opposed to skills particular to one employer’s operation,” the more likely the internship meets the criteria for being unpaid. On the other hand, “if the interns are engaged in the operations of the employer or are performing productive work…, then the fact that they may be receiving some benefits in the form of a new skill or improved work habits will not exclude them from the FLSA’s minimum wage and overtime requirements because the employer benefits from the interns’ work.”

A recent post on Work in Progress, DOL’s official blog, does little to provide clarity. It reiterates the contents of the 2010 Fact Sheet. Moreover, the post also solicits claimants by touting recent enforcement activity. “We are here to help and have taken action to ensure interns receive minimum wage and overtime according to the law. In a 2013 investigation, we found more than $37,000 in back wages due to 38 employees working as unpaid interns for a snowboard company in Waterbury, Vt. Before that, a minor league baseball team in Tennessee paid more than $31,000 in back wages to 14 interns it had paid only $150 per week.”

The bottom line: Before concluding that an internship will be unpaid, apply DOL’s six criteria and review its current enforcement position.

The  Bullard Edge

 *The Bullard Edge wants to thank Annie McClory for contributing her original artwork.

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About the Editor

Be informed, engaged and sometimes entertained

Michael G. McClory joined Bullard Law in 1997. He likes talking about employment law, debating it, proposing revisions to it and even complaining about it.  Perhaps so they could get some work done, his colleagues at Bullard Law suggested that he start a blog about employment law issues (broaden the conversation). And that is how this blog came to be. 

The blog is a forum for discussion about employment, labor and benefits law - new laws, proposed laws, case decisions and social events. Mike will share his views and invites you to respond.  Reader feedback is valuable and will be featured from time to time. Join the discussion with Mike and sign up for the Bullard Law Blog today.

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