As we’ve previously advised, make sure you are prepared for interns this summer! This summer there’s a new legal trend about interns. While wage and hour lawsuits are still hot, the new “it” trend seems to be laws that extend protection against discrimination and harassment for interns.  Recently, states and cities have been adding interns to the protected individuals under their human rights laws.

Retailers have long used interns, both to provide training opportunities for the interns and to supplement their workforce over the summer months. Whether an intern should be paid or unpaid (meeting the test of a “trainee”) is a determination that should be made using the federal six-factor test, and any applicable state tests. 

Regardless if the intern is paid or unpaid, certain policies and procedures need to be tailored to interns, and should differ from those given to regular employees. While recruitment efforts and offer letters need to be prepared just for interns, certain benefits and policies may need to be provided to all workers – even unpaid interns.

This year, New York City joined Washington, D.C. and the state of Oregon in passing a law protecting interns from sexual harassment, and other forms of employment discrimination. Now, several other states are seeking to expand those same protections to interns. In the past month, legislatures in California, New York, and Illinois have debated and voted on these bills.

The decision to give interns the same protections against discrimination and harassment as employees could affect how interns are treated under wage and hour laws. While the NYC law states that it applies to both paid and unpaid interns, it doesn’t make any determination as to whether those interns should be classified as employees, to receive minimum wage and potentially overtime.

The proposed New York state legislation addresses such concerns that some employers may have over the decision to extend anti-discrimination protections to interns. The current text of the bill, which has advanced to the third reading within the state Senate, provides that “nothing in this section shall create an employment relationship between an employer and an intern.”

A similar law is pending in Illinois, but it has been amended to only protect unpaid interns who meet a certain set of factors, which are similar to the federal six-factor test:

the person works for the employer at least 10 hours per week; the employer is not committed to hiring the person at the conclusion of his or her tenure; the employer and the person agree that the person is not entitled to wages for the work performed; and the work provides experience for the benefit of the person, does not displace regular employees, and is performed under the close supervision of staff.

The wording of the Illinois bill shows that legislators are aware that granting unpaid interns, who may not qualify as employees under the law, rights typically only afforded to employees could affect their employment status.

As more states continue to address whether interns, paid or unpaid, will be protected under anti-discrimination laws, stay tuned to the Retail Labor and Employment Law blog for any updates. If you’re having interns this summer in NYC, DC or Oregon, make sure policies and procedures are updated and are distributed to all employees and non-employee interns!

A hot topic for every summer – but particularly this summer – is the status of unpaid interns. You are probably aware that several wage and hour lawsuits have been brought regarding the employment status of unpaid interns, particularly in the entertainment and publishing industries. The theory behind these cases is that the interns in question don’t fall within the “trainee” exception to the definition of “employee” under the federal Fair Labor Standards Act (“FLSA”), as well as applicable state laws. If the intern does fall within this exception, he or she is not subject to wage and hour laws (such as minimum wage or overtime) and the unpaid internship is thus permissible.

Federal and New York State Factors

According to the U.S. Department of Labor (“DOL”), all six of the following factors must be met if an intern can be exempted from wage and hour laws under the “trainee” exception:

1. The internship, even though it includes actual operation of the facilities of the employer, is similar to training that would be given in an educational environment. The more an internship program is structured around a classroom or academic experience as opposed to the employer’s actual operations, the more likely the internship will be viewed as an extension of the individual’s educational experience.
2. The internship experience is for the benefit of the intern. The intern should get more out of the internship than the employer.
3. The intern does not displace regular employees, but works under the close supervision of existing staff. If an employer uses interns as substitutes for regular workers or to increase its existing workforce during certain time periods, then they are more likely to be deemed employees.
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. The internship should be of a fixed duration, established prior to the outset of the internship, and should not be used as a “long-term job interview” for employment.
6. The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship. The parties should enter into a written agreement on this point.

In addition, the New York State DOL has a five-factor test for whether an intern is not an employee.  According to the New York State DOL, all five of these factors must be met, in addition to the U.S. DOL’s six factors:

1. Any clinical training is performed under the supervision and direction of people who are knowledgeable and experienced in the activity. The intern should be supervised by a person in that field, not by an administrator or HR.
2. The trainees or students do not receive employee benefits. The intern should not be eligible for health care, vacation, or discounted services.
3. The training is general and qualifies trainees or students to work in any similar business.  It is not designed specifically for a job with the employer that offers the program. The training must be useful, transferable to any employer in the field, and not specific to that employer.
4. The screening process for the internship program is NOT the same as for employment and does not appear to be for that purpose. The screening only uses criteria relevant for admission to an independent educational program. There should be a separate application and selection process for interns and employees.
5. Advertisements, postings, or solicitations for the program clearly discuss education or training, rather than employment, although employers may indicate that qualified graduates may be considered for employment. It should be obvious that a job posting is for an internship and not for employment.

How Are the Courts Interpreting These Tests?

Several federal circuit courts of appeal have addressed this issue applying various tests. At least one court has used the “all or nothing” test, whereby all six U.S. DOL factors must be met if the interns will be considered “trainees.” Other courts have followed the “totality of the circumstances” test. These courts hold that the six factors are relevant to help determine whether an individual is a trainee, but are not “hard and fast” requirements. Still other courts have used an “economic reality” test, similar to that used in classifying employees and independent contractors under the FLSA. Yet another court created a “primary beneficiary” test, which asks whether the employer or employee is the primary beneficiary of the intern’s labor.

Courts in the Southern District of New York have generally followed the totality of the circumstances test in determining whether an intern is an employee or a trainee, but the scope of the analysis has differed. Currently there are two cases pending in the Second Circuit for a joint decision as to the proper analysis, among other issues. Even after the Second Circuit rules, the Supreme Court will likely weigh in on this topic. However, the Supreme Court recently denied a certiorari requested by a party to an intern case in the Eleventh Circuit.

Practical Considerations in Establishing a Compliant Unpaid Internship Program

• Even if an intern meets the test of being a “trainee,” who is not subject to the FLSA, interns in New York City (and perhaps in other jurisdictions to come) are afforded the same rights against employment discrimination as employees, under the applicable fair employment practices laws.
• When recruiting interns, use different postings, applications, and screening processes than when recruiting employees.
• When drafting an offer letter, ensure that the intern knows that he or she will not be paid, and is not entitled to a job at the end of the internship.
• Review your policies and other benefit plans (for example, vacation/sick leave, workers’ compensation) to determine if interns are included or excluded from coverage.
• Structure the unpaid internship to include shadowing and classroom learning, and if possible, have interns receive school credit. While receiving school credit is not determinative under any of the tests, it is one of the best indicators that the intern is not an employee.

In it, he summarizes five recent labor and employment actions that employers should consider:

1. EEOC Releases Letter Addressing Wellness Programs and Reasonable Accommodation Obligations
2. Paying Interns May Not Be Enough to Stave Off Wage and Hour Claims
3. House Committee Votes Out Bill Prohibiting NLRB from Acting Without a Quorum
4. New York City Human Rights Law Expanded to Prohibit “Unemployment” Discrimination
5. New Jersey May Become the Latest State Law Banning Employers from Requesting Social Media Passwords

Click here to read the full version on ebglaw.com