Student Interns: Pay vs Education

The Fair Labor Standards Act requires for-profit employers to pay their employees for work performed. A seemingly simple principle, right? But the body of litigation over who is considered an “employee” and subject to the pay regulations of the Act is voluminous to say the least.

One historically-excepted class of workers that is not required to be paid is student interns. When specific criteria is met showing that the intern is receiving benefit in the form of education, there is no requirement that they be paid.

In 2010, the U.S. Department of Labor set out to crack down on what it perceived as misuse of the “unpaid intern” classification by providing a rigid list of requirements. The list included a particularly controversial requirement that the employer could not derive any immediate advantage from the activities of the intern if it sought to avoid minimum wage requirements.

The public response to the DOL list was considerable litigation, including a few class actions. The U.S. Court of Appeals ultimately held that the DOL requirements were invalid, and that the litmus test for determining whether a worker is accurately classified as an unpaid intern should be centered around the “relationship as a whole.” In its opinion, the Court identified seven factors to be considered in the analysis and, in January of this year, the DOL revised its list of criteria.

It is expected that the new standards will make it easier for companies to engage unpaid interns, but employers should remain vigilant in ensuring that the primary benefit of the work is the intern’s education before deciding that compensation can be avoided.

If you have questions regarding the employment of student interns, please feel free to contact our office at (248) 477-6300.

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