April 01, 2016 | By Mark B. Rhoads
TAGS: internships, international students
NACE Journal, April 2016
What are the legal issues surrounding international students and unpaid internships?
The U.S. Department of Labor (DOL) is rigorously investigating "unpaid internship" programs to determine if the work performed is properly "volunteer" work under the law, or instead whether Wage and Hour laws mandate that the work be compensated.
DOL rules governing when an internship can be "unpaid" are not new, and have been in place for many decades. However, until recently, the DOL has not made enforcement these rules a priority. It is a priority now.
Here is why this issue is important for international students:
Over the years, many employers and many students (U.S. citizens and international students) have engaged in unpaid internship programs that are in flat violation of DOL rules and the "wage" requirements of the Fair Labor Standards Act (FLSA). The FLSA prevents exploitation of workers by requiring employers to pay wages for work performed by workers.
There are circumstances where an employer can have interns or trainees work without pay, but those circumstances are very limited, and the internship must meet very strict criteria in order to be lawfully "unpaid." For students who are U.S. citizens or permanent residents, there is no risk to the student if the student engages in an unpaid internship program that should be paid, although, of course, the employer may be required to pay back wages to the intern.
For foreign students, however, the risk is much greater.
If a foreign student engages in an unpaid internship without proper work authorization, and the DOL or a court later determines that the internship should have been paid employment, the foreign student will have violated immigration status and risks deportation. As a result, foreign students, employers, and career services professionals need to know the rules about unpaid internships.
Are your international students or interns at risk of violating their immigration status by engaging in a volunteer internship program? The answer requires the following analysis:
The key point is this: Whether an international student in F-1 or J-1 status requires work authorization is not governed by whether the student is paid. An international student may need proper F-1 or J-1 work authorization even for unpaid work. Only if the work is properly "volunteer" unpaid work under DOL rules can the international student perform the work without proper work authorization.
The general rule under the FLSA is that, if an individual works under the direction and control of a company or organization, and provides a beneficial service for the company or organization, the individual is supposed to be paid at least the federal minimum wage for the service.
There are exceptions to this rule, but the exceptions are limited. For example, an individual can provide truly volunteer services for a charitable nonprofit organization (such as working a church bake sale, helping the homeless, and so on).
But what about volunteer training or internship programs with private for-profit employers?
The DOL Wage and Hour Division has established a six-factor test for determining whether work is legitimately volunteer training (for which no pay or work authorization is required) or whether it is employment (for which pay and work authorization is required).
If all six of the following criteria apply, the trainees are not employees within the meaning of the FLSA, and are properly classified as unpaid volunteers for which no "employment authorization" is required:
The fourth item is the most problematic in many cases. Note that all six factors must be satisfied.1 This is not an easy test to apply. For example, suppose a student works for the summer as an intern at a financial institution. If the student shadows regular workers, observing operations, sitting in on meetings, and so forth, that is probably permissible unpaid training because the intern is providing no immediate advantage to the employer. But what if the intern does research into financial markets, which is then included in a report to senior management? Is the employer "deriving an immediate advantage" from the work? Arguably, yes, in which case this would be "employment."
The DOL Wage and Hour Division issues opinion letters to employers that request guidance regarding "internship programs." Examples include:
These examples seem to indicate that volunteer work is acceptable for training programs in which the educational curriculum at the college or university has a "practical experience" requirement. There may be other acceptable programs, but each program must be evaluated pursuant to the DOL's six-factor test.
The safe rule is: If the international student trainee will provide the employer with beneficial service, even if unpaid, then proper work authorization should be required.
What is proper work authorization for an international student?
That depends on the student's status. International students in the United States can attend university in any one of a number of immigration statuses:
1. Students using "dependent" visas (for example, dependents of spouses or parents who are in the United States in a work-authorized visa status, such as H-1B, E-1/E-2/E-3, L-1, O-1). In general, students attending school using a dependent visa are ineligible to work, unless the work is voluntary under the six-factor test.
2. Students in F-1 status (which is a typical "student" status for students enrolled in an academic program). F-1 students are not permitted to engage in employment without the requisite authorization. For F-1 students, the work authorization options are:
3. Students in J-1 status (for "exchange visitors" engaged in designated programs at a U.S. university). For J-1 students, the options are:
Given the difficulty and ambiguity of the DOL six-factor test, the safest rule for international students should be that, if a student is providing a beneficial service to an employer, whether paid or unpaid, the student should obtain proper authorization to work.
1 There are two recent Federal Court lawsuits that have addressed the issue of whether a "volunteer internship" position should be paid. In the lawsuits, volunteer interns alleged that they should in fact, be paid because the DOL "six-factor" test was not met. The two Federal Courts adopted a more flexible "economic realities" test. This test analyzes who is the "primary beneficiary" of the work: the employer or the intern. This test also evaluates other factors including whether the work is consistent with the intern's school year, whether the work lasts longer than necessary for "training" and so forth. To date, the DOL has not adapted this test, and follows the traditional six-factor test.
Note: This column provides general information regarding work options for foreign students. It is not intended as legal advice and does not establish an attorney/client relationship. Each situation is unique, and students and employers should consult their legal counsel to determine work eligibility.
Mark B. Rhoads is an attorney with McCandlish Holton, PC.