“School’s Out For Summer”: Legal Issues Impacting Employers Who Engage Summer Interns

With summer fast-approaching, employers who plan on utilizing summer interns should be aware of two issues that can have serious legal implications. The first applies to employers who engage, or are considering engaging, unpaid interns ─ when is an unpaid intern in fact an “employee” legally entitled to wages? The second issue applies to both paid and unpaid interns ─ do the discrimination laws protect interns from adverse employment actions based on their protected class status? Consideration of the these questions before “intern season” begins can avoid problems down the road and prevent expensive and time-consuming litigation.

When is an unpaid intern actually an employee who is entitled to wages under federal and state wage and hours laws? Last summer, in Glatt v. Fox Searchlight Pictures, Inc., the Southern District of New York tackled this issue with regards to the Fair Labor Standards Act (“FLSA”).  In Glatt, the court relied on the six factors identified by the United States Department of Labor in Fact Sheet #71 to determine if an intern has been properly classified as such:

1. The internship must be similar to training provided in an educational environment;
2. The internship must be for the intern’s benefit;
3. The intern must work under close direction of existing employees and can’t displace a regular employee;
4. The employer does not derive immediate advantage from the intern’s work, and may actually have its operations impeded;
5. Completion of the internship does not guarantee a job offer from the employer; and
6. The parties understand that the position is unpaid.

If the above criteria are satisfied, the intern is not in an employment relationship with the employer, and therefore, need not be paid.

Employers should also be aware that some states, such as New Jersey and New York, have more stringent regulations in place that require employers to compensate interns in most situations. The New Jersey Wage and Hour Regulations, N.J.A.C. 12:56-18.2, provide an eight-part test to determine if an intern ─ in New Jersey called a “student learner” ─ who participates in a school-to-work program at either a For-Profit or Not-For-Profit Business is entitled to wages. If the following eight criteria are met, an intern may be unpaid:

1. The student shall be at least 16 years of age;
2. The activity must be related to a formal school-to-work transition plan for a student learner;
3. There is collaboration and planning between worksite staff and school staff resulting in clearly identified learning objectives related to the non-paid activities;
4. Any productive work is incidental to achieving learning objectives;
5. The student learner receives credit for time spent at the worksite and the student is expected to achieve the learning objectives;
6. The student learner is supervised by a school official and a workplace mentor;
7. The non-paid activity is of a limited duration, related to an educational purpose and there is no guarantee or expectation that the activity will result in employment; and
8. The student learner does not replace an employee.

Similarly, the New York State Minimum Wage Act, codified as New York State Labor Law §§650-665, provides that an intern at a For-Profit Business is exempt from the law ─ and not an “employee” ─ if the intern is not in an employment relationship with the employer. New York uses the six DOL criteria mentioned above and five additional criteria to determine if an employment relationship exists. A complete list of these requirements can be found on the New York Department of Labor website. If an employment relationship exists ─ which it will in most scenarios ─ the intern must be paid for his/her services.

Do the discrimination laws protect paid and/or unpaid interns? On March 26, 2014, the New York City Council unanimously passed a bill that expanded the New York City Human Rights Law (NYCHRL) to prohibit employment discrimination against both paid and unpaid interns. The bill comes in the wake of the Southern District of New York’s decision in Wang v. Phoenix Satellite Television US, Inc., Case No. 1:13-cv-00218-PKC (S.D.N.Y. 2013), where the court held that the NYCHRL did not protect an unpaid intern who claimed hostile work environment sexual harassment. The amendment to the NYCHRL provides interns with the same protections afforded to employees. Specifically, employers are prohibited from discriminating against interns on the basis of their actual or perceived age, race, creed, color, national origin, gender, disability, marital status, partnership status, sexual orientation, alienage or citizenship status, or status as a victim of domestic violence, sex offenses or stalking. The legislation defines an “intern” as “an individual who performs work for an employer on a temporary basis whose work: (a) provides training or supplements training given in an educational environment such that the employability of the individual performing the work may be enhanced; (b) provides experience for the benefit of the individual performing the work; and (c) is performed under the close supervision of existing staff. The term shall include such individuals without regard to whether the employer pays them a salary or wage.”

Moreover, in New Jersey, on December 5, 2013, legislation S-3064, which provides legal protections and remedies for persons engaged in unpaid internships, was introduced to the Senate. The legislation proposes to amend three existing New Jersey laws ─ the New Jersey Law Against Discrimination (LAD), the Conscientious Employee Protection Act (CEPA), and the Workers Freedom from Employer Intimidation Act ─ to extend protection to unpaid interns. We will keep our readers posted as to the progress of this legislation.

For questions regarding the legal compliance of internship programs, please feel free to contact an attorney in the Gibbons Employment & Labor Law Department.