Spotlight Online for Employment and Recruiting Professionals, March 17, 2010

The legal issues column in the February 2010 edition of the NACE Journal  yielded a follow-up question from a NACE member who wanted to know if an employer must follow the minimum wage rules if it chooses to pay an intern whom, according to U.S Department of Labor (DOL) criteria, can be legitimately unpaid. Furthermore, the member wanted to know if stipends or a flat rate for the shift—regardless of the number of hours in the shift—are allowed.  

Edward J. Easterly, Esq., an attorney in the Labor and Employment Law Department at Tallman, Hudders & Sorrentino, responded that if the intern is truly a “trainee” he or she would not be subject to the requirements of the Fair Labor Standards Act (FLSA).  

“As such,” Easterly points out, “the minimum wage requirements would not apply. Notwithstanding this fact, once you begin to pay an individual, regardless of his/her classification, it gives the appearance of an 'employee/employer' relationship. As a result, an employer should be careful when providing such a payment to its interns. Additionally, each state has its own laws regarding the payment of minimum wage and an employer should review any state law requirements before implementing such a plan.”

In the NACE Journal article, Easterly and co-author George Hlavac, Esq., note that under the FLSA, an “employee” is an individual employed by an employer.  

“This somewhat circular definition is not overly instructive in defining an employment relationship,” they wrote. “Nevertheless, if an intern is considered an employee by the FLSA, he or she is afforded all of the protections set forth under the statute. If an individual is a ‘learner/trainee,’ however, the requirements of the FLSA do not apply.” 

The Wage and Hour Division of the DOL has developed six criteria for identifying a learner/trainee who may be unpaid. These criteria are: 

• The training, even though it includes actual operation of the employer’s facilities, is similar to training that would be given in a vocational school.
• The training is for the benefit of the student.
• The student does not displace regular employees, but works under the close observation of a regular employee.
• The employer provides the training and derives no immediate advantage from the activities of the student. Occasionally, the operations may actually be impeded by the training.
• The student is not necessarily entitled to a job at the conclusion of the training period.
• The employer and the student understand that the student is not entitled to wages for the time spent training. 

According to the DOL, all six requirements must be satisfied in order for an intern to be deemed a non-employee trainee.  

“The courts, however, have taken a more liberal interpretation of the six factors and have implied that the requirements should be viewed under a totality of the circumstances that does not require all factors to be met,” Easterly and Hlavac wrote.