I’m not sure if you’ve heard, but times is hard on the boulevard. Even after some decent news on job creation in March that led President Obama to say “we are beginning to turn the corner,” the unemployment rate remains at a troubling 9.7%. That’s a really, really bad number — particularly when you look at the level of growth still needed to make any significant dent in the jobless rate.
The economy needs to add more than 100,000 jobs a month just to absorb new entrants into the labor market, let alone provide a livelihood for the 15 million Americans already looking for work. Without constant, robust growth, the unemployment rate won’t budge. Indeed, the Congressional Budget Office has projected that the rate will hover around 10 percent for the rest of the year.
It is no surprise, then, that more and more out-of-work people are more and more willing to do anything they can if it might lead to a job. Even work for free.
Students and recent college grads have suffered through unpaid internships in hopes that the experience would lead to something better in the future. Heck, I did two in addition to working at my college newspaper for free. But the economic downturn has created an environment where many companies are seeing these opportunities more as a chance to get some free labor rather than provide educational opportunities for the future middle managers of America. And not only is against the spirit of an internship — it is against the law.
Convinced that many unpaid internships violate minimum wage laws, officials in Oregon, California and other states have begun investigations and fined employers. Last year, M. Patricia Smith, then New York’s labor commissioner, ordered investigations into several firms’ internships. Now, as the federal Labor Department’s top law enforcement official, she and the wage and hour division are stepping up enforcement nationwide.
Many regulators say that violations are widespread, but that it is unusually hard to mount a major enforcement effort because interns are often afraid to file complaints. Many fear they will become known as troublemakers in their chosen field, endangering their chances with a potential future employer.
The Labor Department says it is cracking down on firms that fail to pay interns properly and expanding efforts to educate companies, colleges and students on the law regarding internships.
“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.
As always (… OK … “as often”), we were out ahead of the curve on this story and ran a piece warning employers about unpaid internships waaaay back in July 2008. Joel W. Rice of the law firm Fisher & Phillips expected an increase in unpaid internships — for all the wrong reasons — as the economy faltered following the collapse of Bear Sterns and came up with the following guidance in regards to the Department of Labor’s six criteria for gauging whether or not an unpaid internship is legal.
In a nutshell, the spirit of the law is to ensure that the intern is getting more out of the experience than the employer, but Rice’s insights will help you recognize whether or not your internship program is kosher.
1. Is the training similar to that which would be given in a vocational school?
If the intern receives training in the types of skills or intellectual prerequisites for success in your field, it will increase the chances you satisfy this criterion. Certainly, if the internship is in conjunction with an academic program for which the intern is required to write a paper or provide periodic written reports, this will help satisfy DOL officials. If the intern is only performing basic clerical work-such as answering phones and handling mail, however, this would not be characteristic of vocational school training.
2. Is the training primarily for the benefit of the intern? Is there some indication that the intern is benefiting from the program, in terms of training, exposure to the industry and contacts for potential job opportunities?
If your interns are earning academic credit, this criterion is more than likely satisfied. The focus of the internship should not be upon the free labor that the intern is providing; it should be upon the educational benefit to the intern. Communications to the intern should stress the value of the program to them, not how valuable they are to you. Fairly or unfairly, your communications to the intern could convey the erroneous impression that the program is primarily for the company’s benefit.
3. Does the intern displace regular employees or work under their observation?
To the extent the intern is involved with tasks such as answering phones, delivering mail and other clerical activities, it could be perceived as lightening the workload of existing employees. If the intern is working under someone else’s close supervision, then displacement is less likely to be found. An individual should be assigned to observe, or at least periodically monitor, the intern’s activities.
4. Does the company derive immediate advantages from the intern’s activities?
To the extent the company is primarily utilizing the intern to get needed work accomplished, it looks like it is deriving an immediate economic advantage from the intern’s presence. Instead, to satisfy this component, there should be more of an emphasis on the learning opportunity for the intern, the training afforded by the company. It also helps if there is and an indication that the company is committing some of its resources to such training, perhaps to the detriment of operations.
5. Is the intern entitled to a job at the conclusion of the training period?
Interns are often hopeful that the experience will lead to a position with the company. Understandably, many companies view the internship program as a low-risk opportunity to evaluate potential candidates for full-time employment. While it is permissible to give consideration to your interns when assessing your employment needs, there should be no guarantee of employment at the end of the internship.
6. Does the intern understand they are not entitled to wages for the training time?
This final part of the test is self-explanatory. The best practice would be to write this in an introductory letter to the intern on the nature of the program.
If you think this looks like “Free Labor,” the Department of Labor might want a word with you.