Unpaid Interns Get A Closer Look

On February 5, 2010 Sustainable Finance ran a post which:
-Noted the rapid growth in unpaid internships with the reminder that just calling an employee an intern did not exempt the employer from minimum wage laws;
-Explained that most states applied US  Dept. of Labor guidelines – under these guideline, an internship must meet each part of a six part test to qualify for a trainee exemption;
-Observed that most internships in professional settings failed at least one part of the test, because the interns were doing work that a regular employee might do, often without close supervision, creating serious issues under at least 3 of the 6 tests: “(2) The training is for the benefit of the trainees or students; (3) The trainees or students do not displace regular employees, but work under their close observation; (4) The employer derives no immediate advantage from the activities of trainees or students, and on occasion the employer's operations may be actually impeded”;
-Questioned whether the “turn a blind eye” approach to minimum wage enforcement was always appropriate for unpaid interns; and
-Suggested changes to the guidelines to make the minimum wage law more realistic and thus more readily enforcible.

Last week the unpaid internships were getting some new attention, from labor enforcement officials and the New York Times.   On April 2, the Times noted that the US Department of Labor and its top enforcement official, Solicitor Patricia Smith, were stepping up enforcement nationwide. “If you’re a for-profit employer or you want to pursue an internship with a for-profit employer, there aren’t going to be many circumstances where you can have an internship and not be paid and still be in compliance with the law,” said Nancy J. Leppink, the acting director of the department’s wage and hour division.

On April 7, 2010 David Balter, Acting Chief Counsel of  the California Department of Labor Standards and Enforcement opined that the interns in the program conducted by Year Up, Inc. were exempt from California minimum wage law.  This was hailed in the Times on April 9, 2010 as a slightly looser interpretation of the six part test, with assessment based upon the “totality of the circumstances”.

Mr. Balter's letter speaks for itself, and you can draw your own conclusions, but I'm not seeing much loosening.  First, the Year Up program seems to be a model which the Federal DOL and every state would encourage, and none would close down on minimum wage grounds.  Second, although there are opening and closing references to “totality of circumstances”, the Year Up opinion very clearly applies each part of the six part test separately.  Although sometimes straining a little to reach a common-sense result, the opinion clearly determines that Year Up passes each of the six parts.  In Reich v Parker Fire Protection District the Tenth Circuit used "totality of circumstances" to exempt trainees in a fire department program, even though the program  clearly failed Part 6 of the 6 part test.  Although Mr. Balter uses the same phrase, "totality of circumstances", so does the Federal Department of Labor in it's opinion of 5/17/04, yet the DOL clearly still disagrees with the Tenth Circuit and expects a 6 for 6 test score. I see no clear statement in Mr. Balter's letter that an internship could  fail one of the six tests and still be exempt from minimum wage law in California based on the totality of the circumstances.  In fact he appears to be looking at the totality of circumstances within a very detailed, separate analysis of each of the six parts, suggesting, with some ambiguity, that California is still going with the DOL and not the Tenth Circuit, at least for now.

The Year Up opinion is a detailed analysis which thoughtfully emphasizes supervision and benefit to the trainee and common sense application of the six part test.  It offers no comfort to the employer who is relying on unpaid intern(s) to run the business, even if that employer is offering real training, experience and credentials to sophisticated interns who accept their fate willingly, even if the employer could not afford paid employee(s) in place of the interns.  Despite the Times stories and the quotes from public officials, there was no actual surge in minimum wage law enforcement last week and no clear change in California's approach.  The only real new news is that the Times is interested.  The story remains - minimum wage laws for unpaid internships are like speed limits - not many employers are getting caught and it's not clear if society wants this to change.  Let's see what happens if those promises of stepped up enforcement turn into reality – displacing interns who must then look for work in an environment with few jobs to offer.

Photo Credit and Note - lololori's photo was captioned "Intern Olympics at Moosylvania" with the subtitle "Final Round of Competition for King of All Interns". A note adds that the bunch of grapes in the middle "won. also, hired".  Someday he or she will retire as a box of raisins.