How to Engage an Intern and Not End Up with an Employee

by Hirschfeld Kraemer LLP
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Hirschfeld Kraemer LLP

Welcome to the third article in our four-part Spring Series discussing important developments in California’s wage and hour laws that impact our higher education clients. Earlier, we provided a general overview of California wage and hour laws and discussed the application of those laws to volunteers on your campus. We now examine how California’s wage and hour laws impact internships on your campus.

For decades, students have held internships, both on and off campus, that served the mutual benefit of the student and the university (or an outside employer). Internships permit the student to gain practical work experience and develop important contacts in the field or their chosen industry.

Everything was changed in the middle of this decade, however, with a flurry of class actions brought primarily against for-profit commercial employers (mostly in the sports and entertainment industries) where interns complained of being exploited and having to provide “free labor.” The interns alleged that, given their job responsibilities and nature of the internship, they were really employees under the law. They sought protection under the federal Fair Labor Standards Act (“FLSA”), which requires most employees to be paid minimum wage and overtime pay. In the face of this recent uptick in litigation, academic institutions are wise to ensure compliance with the laws dictating who may be considered an intern, as opposed to an employee.

There is no California statute on point that sets forth the legal standards for internships. The California Division of Labor Standards Enforcement, the state agency charged with enforcing the state’s wage and hour laws, has turned to the FLSA for guidance. In its Opinion Letter issued in April 2010, (FN1) the state agency approved of the six factors initially identified by the federal Department of Labor (FN 2) to determine when an individual may be considered an intern or trainee and thus exempt from minimum wage and overtime requirements.

The DOL factors are:

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 not displace regular employees, but works under close supervision of existing staff;

4. The employer 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.

A 2014 unpublished California appellate decision (FN3) suggests these criteria need not be strictly or rigidly applied, as each situation must be considered within a “totality of circumstances” that includes the economic realities of the relationship between the parties.

In addition to closely following the above DOL six criteria in assessing your internship programs, a best practice for California employers in this area is to have every unpaid intern sign a written agreement that, at a minimum: 1) clearly identifies the educational benefits of the internship; 2) states that the intern is not displacing regular employees, is not entitled to minimum wage or overtime, and does not expect a job at the end of the placement; and 3) establishes a beginning and end time for the internship.

One further note for your international students. Internships also pose issues with respect to those international students on campus. Regardless of immigration status (including F-1 international student, J-1 exchange visitor, dependent in H-4, L-2, O-3 or TD status and many others), international students are not allowed to accept internships freely like students who are U.S. citizens, lawful permanent residents or beneficiaries of the Deferred Action for Childhood Arrivals (DACA) program. For example, F-1 students are allowed to “work” on-campus no more than 20 hours per week during academic terms and are not allowed to work off-campus without authorization from at least the Designated School Official (DSO) at their school (either for formal practical training or for an unpaid internship); in many cases they also need approval of U.S. Citizenship and Immigration Services.  Internships involve compliance obligations for both international students to maintain lawful status and for internship hosts to comply with U.S. immigration law, regardless of whether the intern is paid or unpaid or whether the position is characterized as “work” or an “internship.”

FN 1. http://www.dir.ca.gov/dlse/opinions/2010-04-07.pdf.  Although DLSE Opinion Letters do not have the full force of the law as statutes and regulations, courts consider agency opinion letters as persuasive authority.
FN 2. https://www.dol.gov/whd/regs/compliance/whdfs71.htm 
FN 3. Woodruff v. County of San Diego In-Home Supportive Services Public Authority, (2014) 2014 WL 2861431.

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