‘Tis the Season for Internship Nightmares

With college exams finalized we hear from many companies that bring on college interns for a few weeks in late December and early January. It provides clients with help to catch up on things that slipped through the cracks during the course of the year and provides the intern with a really sweet line on their resume—I mean who wouldn’t want to work in a brewery/distillery/or winery?

Insofar as the company is a small establishment, or simply operating with limited funds, the thought of an unpaid internship may be appealing—this blog post (unfortunately) is likely going to squash that unpaid intern dream for you. Over the last few years we have been seeing more and more lawsuits across the country from interns in coveted positions who are claiming that state and federal wage and hour laws have been violated, either for failure to pay the minimum wage and overtime, or failure to pay at all.

The Department of Labor’s 2010 guidance on this issue as to whether unpaid interns working in the for-profit private sector should be classified as employees provides that in order to be unpaid the employer must be able to prove:

  • 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;
  • The internship experience is for the benefit of the intern;
  • The intern does not displace regular employees, but works under close supervision of existing staff;
  • 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;
  • The intern is not necessarily entitled to a job at the conclusion of the internship; and
  • The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

If the employer is unable to show any of these factors (hence the “and”) the individual should be compensated at least at the state or federal minimum wage (whichever is higher).

Earlier this year, however, the Second Circuit changed these factors around a bit and noted that the question as to whether someone is properly classified as an unpaid intern is “whether the intern or the employer is the primary beneficiary of the relationship.” In determining this, the Court will look at a variety of factors:

  • The extent to which the intern and the employer clearly understand that there is no expectation of compensation. Any promise of compensation, express or implied, suggests that the intern is an employee—and vice versa.
  • The extent to which the internship provides training that would be similar to that which would be given in an educational environment, including the clinical and other hands‐on training provided by educational institutions.
  • The extent to which the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit.
  • The extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic calendar.
  • The extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning.
  • The extent to which the intern’s work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern.
  • The extent to which the intern and the employer understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship.

Accordingly, insomuch as you are currently operating in New York, Vermont, or Connecticut, take note of this updated standard. Generally, however, if you are considering bringing on unpaid interns during their holiday break this year, make sure that these individuals should appropriately be categorized as unpaid interns (as opposed to employees) to guard against a wage and hour lawsuit. If you have further concerns contact Tawny Alvarez of Verrill Dana’s Breweries, Distilleries & Wineries practice group.

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