FLSA Impact on Interns: Classification Guidelines

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The U.S. Department of Labor (DOL) has strict compliance standards for classifying interns, and the impact of the FLSA on interns is clear. Interns in a "for profit" organization are considered employees unless they meet a rigid, six-part litmus test. As the DOL explains in Fact Sheet #71, "internships in the 'for-profit' private sector will most often be viewed as employment, unless the test described below relating to trainees is met."

The Six-Part DOL Test for Interns

Whether an intern is actually an employee will depend on the facts and circumstances of each case. According to Fact Sheet #71, the standards for internships in the "for profit" sector (reproduced verbatim below) are high, so your risk of liability under the FLSA is equally high, as follows:

  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.

Three Tips to Reduce Your Risk of FLSA Liability

With those requirements in mind, there are a few things you can do to diminish the possibility of non-compliance with the FLSA:

1. Put Education First

You should be certain that the internship is formally structured around an educational or academic experience rather than the organization's operational needs. For instance, make sure an academic institution offers some form of academic credit for the intern, oversees the interns' experience with the organization and provides some measurable learning/training goals that the intern is striving toward.

The intern needs to receive the balance of the benefits from the internship, not the organization. The DOL will scrutinize the facts and weigh the balance of benefits. As Fact Sheet #71 says, if interns "are performing productive work (for example, filing, performing other clerical work, or assisting customers), 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."

2. Regulate Work Type

On a related note to the above, make sure the organization does not depend upon the productivity of interns for its daily business operations. As the DOL puts it, the organization should ensure that "the intern does not perform the routine work of the business on a regular and recurring basis, and the business is not dependent upon the work of the intern." Don't ask interns to perform essential functions in your business operation because the DOL applies a strict standard: "If the employer would have hired additional employees or required existing staff to work additional hours had the interns not performed the work, then the interns will be viewed as employees and entitled compensation under the FLSA." Having an intern "job shadow" one of your employees is fine, but having that intern act as a substitute for that employee exposes you to FLSA liability.

3. Clearly Establish Expectations

The intern should fully understand that the internship is not a trial for a future job or some sort of probationary period before an actual job offer is forthcoming. As Fact Sheet #71 explains, "if an intern is placed with the employer for a trial period with the expectation that he or she will then be hired on a permanent basis, that individual generally would be considered an employee under the FLSA." Define a fixed time period for every internship, and make no promises about future employment.

The impact of the FLSA on interns can be most clearly seen in the strict standards set by the DOL to define what an "intern" truly means. Employers have a high burden to prove that the intern is not an employee who should be covered by the FLSA. But the responsibilities don't end there, you should also be careful to determine what additional local or state laws might further regulate an intern's status in the organization. So although internships provide value for the intern and employer alike, vigilance and careful management are paramount to ensure compliance.