BY ALAN S. LEVINS AND KATHERINE M. KIMSEY|MARCH 1, 2016
Internships have become a rite of passage in the United States for many aspiring workers. There are published estimates indicating that that “70 to 75 percent of students at four year [colleges] undertake at least one internship.” See Ross Perlin, Intern Nation: How to Learn Nothing and Learn Little in the Brave New Economy (Verso 2012) at 26.
Many of those internships are unpaid (Id. at 27), which raises a substantial legal question about-and the specter of substantial liability for-failing to treat “interns”as employees. To further complicate the matter, the legal test for determining just who qualifies as a true intern, and who must be treated as an employee entitled to wages and benefits, has not always been clear.
Indeed, the law regarding unpaid internships is in conflict at the federal appellate court level.In contrast, the State of California has established a relatively clear set of guidelines to follow to ascertain when an “intern” must be paid the minimum wage and provided with employment benefits. In most cases, however, employers must comply with both state and federal law.
Nine years after the Fair Labor Standards Act (FLSA, 29 U.S.C. §§ 201, et seq.) was enacted by Congress, the Supreme Court issued a brief decision carving an exception to the protections embedded in what was then a relatively new law. The Court decided that persons who were given training by a railroad company before they were eligible to be hired were not ’employees’ under the FLSA during the course of that training.For that reason, the railroad was not required to pay the trainees the minimum wage set out by the FLSA during the approximately week-long training.
See Walling v. Portland Terminal Co., 330 U.S. 148, 152-153 (1947).
Over the years since the Portland Terminal decision was handed down, the DOL has articulated six key factors that must be met in order to avoid having a “trainee” classified as employee. The factors are:
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 fromthe 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.
See Wage & Hour Div., Fact Sheet #71, Internship Programs Under the Fair LaborStandards Act (April 2010), available at http://www.dol.gov/whd/regs/compliance/whdfs71.htm(hereafter “DOL FactSheet”).
Although this seems reasonably straightforward, federal appellate courts have notbeen consistent in interpreting and applying Portland Terminal or the DOL factors.
Some courts have eschewed the six-factor test altogether.See, e.g., McLaughlin v. Ensley, 877 F.2d 1207, 1209-10, n.2 (4th Cir. 1989) (applying a “primary beneficiary” test); Solis v. Laurel brook Sanitarium and School, Inc., 642 F.3d 518, 525(6th Cir. 2011) (applying a “totality-of-the-circumstances approach” and “primary beneficiary” test).Other courts have applied the test exactly as written by the DOL.See Atkins v. General Motors Corp., 701 F.2d 1124, 1128 (5th Cir.1983) (stating the six factor test “is entitled to substantial deference by this court”). Still other courts have noted the usefulness of the test, but refused to apply it strictly. See Reich v. Parker Fire Protection Dist., 992 F.2d 1023, 1026 (10th Cir. 1993) (using a balancing of the six factors).