The Fair Labor Standards Act (FLSA) is the federal law mandating minimum wage and overtime payments by employers to employees. Its impact can be unusual in that the federal Department of Labor defines employment as any work that the employer permits to occur. In other words, that could include unpaid interns and other persons assisting your organization that you do not consider to be employees and who are not on your payroll.
RECOMMENDED STANDARDS FOR UNPAID INTERNSHIPS & FLSA
Recent U.S. Department of Labor (DOL) guidelines have prompted questions about whether federal Fair Labor Standards Act (FLSA) principles regarding minimum wage and overtime requirements are different for unpaid internships at non-profit organizations or for those sponsored by educational institutions for which the intern receives academic credit.
The answer is: No, they are not. The U.S.Department of Labor has recently issued a Fact Sheet stating that for profit companies may have financial compensation liability for unpaid internship students under the federal wage and hour standards.
In a footnote, DOL states that unpaid internships are “generally permissible” for a non-profit charitable organization under the correct circumstances. The DOL publication implies that the relationship is more likely not to be viewed as FLSA employment (creating minimum wage and overtime liability) if it is “structured around a classroom or academic experience . . . ,” such as “where a college or university exercises oversight over the internship program and provides educational credit ….”
Interns who are “engaged in the operations of the employer or . . . performing productive work” activities are generally viewed by DOL as FLSA employment where a “business” is concerned. Non-profit organizations permitting internships, and entities considering participating in student internships, should not simply assume clear-sailing where the risk of FLSA claims is concerned.
Whether an unpaid internship occurs under the auspices of an educational institution or in a non-profit organization, in the initial analysis, the FLSA issue is whether the totality of the circumstances show that the relationship is for the purpose of generalized learning, education, and training that imparts to the intern significant knowledge of a broadly-applicable kind, or is the internship an opportunity to have the person perform work for the organization? In other words, if the purpose is “We could sure use help from an intern this summer,” that is a danger sign – whether the setting is not-for-profit, school-related, or otherwise.
RECOMMENDED POLICIES FOR UNPAID INTERNSHIPS
Our recommendations for unpaid internship programs are as follows:
1. Your organization should adopt and follow a stated, written policy with respect to soliciting/advertising, interviewing and helping any interns.
2. Your internship program and policy should focus on school or university students where the student receives academic credit for the internship. Several schools and colleges in the Nashville area have such programs.
3. The language in your policy and all letters, memoranda, emails, tweets, Facebook and other references to your internship program should focus on and emphasize the goals and standards deemed acceptable for non-FLSA treatment by the Department of Labor.
4. You should designate a specific administrator to monitor compliance with your internship policies and goals and you should maintain careful records of the intern and how the intern learns and benefits from your program.
5. Any and all inquiries from the Department of Labor should be addressed and handled, or at a minimum be approved, by the President/CEO of your organization.
6. In the event of a DOL inquiry, audit or investigation, contact your legal counsel immediately. As with so many areas of the law today, your good common sense will not suffice in this area of the law.