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Federal and California Law on Unpaid Internships

unpaid intern.jpgUnpaid internships have historically been a way for students or recent graduates to gain valuable experience with the possibility of future employment. In the United States, two-thirds of students have completed at least one internship before they graduate from college and nearly half of all internships in the country are unpaid. However, unpaid internships have recently become more controversial following several lawsuits claiming that such programs constitute a violation of state and federal wage laws. While most of these lawsuits have involved the use of unpaid interns in the entertainment, media, and fashion industries, some private-sector businesses have decided that having interns is simply not worth the risk.

For those private companies that do have unpaid internship programs, it is essential that employers be aware of and closely follow state and federal guidelines to reduce exposure to costly litigation.

Intern/Trainee vs. Employee

The United States Department of Labor developed a six-part test from the Supreme Court's Portland Terminal case to determine whether a trainee/intern for a for-profit company is an employee for purposes of the Fair Labor Standards Act (FLSA) minimum wage and overtime requirements. The California Division of Labor Standards Enforcement applied the same six-part test in an opinion letter to determine whether participants in a trainee/intern program should be treated as employees under California's wage and hour laws. Interns or trainees will generally be viewed as employees, unless the employer meets the following six-part test:

  1. The internship is similar to training that would be provided in an educational environment;
  2.  The internship experience is specifically beneficial for the intern;
  3. The intern does not displace employees at the company, but works under the supervision of staff that already exist;
  4. The employer that offers the training obtains no advantage from the work of the intern; 
  5. The intern is not necessarily entitled to employment once the internship is over; and
  6. The employer and the intern both realize that the intern will not be provided compensation for the activities.

It is clear that interns should be receiving more of the value from unpaid internships than the employer. If employers fail to meet this test, they could be held liable for unpaid wages including applicable overtime compensation, liquidated damages, and possible penalties for each trainee/intern that was not compensated appropriately.

California Law Protects Unpaid Interns from Discrimination and Harassment in the Workplace

California enacted a law in 2014 that amended the California Fair Employment and Housing Act to include unpaid interns, volunteers and individuals in training programs. This law prohibits employers from discriminating against or harassment of individuals in unpaid internships based on any legally protected class. This law went into effect as of July 1, 2015.

Contact Our Attorneys Today

Do not put your business at risk of legal action. Do not hesitate to call our skilled San Jose employment lawyers at (408) 971-6270, who can help you set a company policy that will protect you from adverse actions. We serve many areas, including Santa Clara, Campbell, Los Gatos, and New Almaden.

Sources:

http://www.economist.com/blogs/economist-explains/2014/09/economist-explains-7

http://www.latimes.com/entertainment/envelope/cotown/la-et-ct-viacom-settles-intern-lawsuit-20150312-story.html

http://www.forbes.com/sites/cameronkeng/2013/09/06/the-era-of-internships-are-over-never-hire-an-intern-again/

http://www.dol.gov/whd/regs/compliance/whdfs71.htm

https://www.dir.ca.gov/dlse/opinions/2010-04-07.pdf

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