WORKPLACE LAW -
Internships

Question:

My company is considering taking on some interns this summer. I am concerned that we might run afoul of the Labor Code, as I understand the standards for interns have changed. Can you tell me if this is true, and if so, what the new standards are?

Answer:

Many employers and interns find internship relationships very beneficial. In a true internship arrangement, the intern learns valuable skills, and is not considered an employee subject to California wage and hour laws. However, employers need to carefully analyze whether their individual program meets the legal definition of an intern/trainee program in order to determine whether a worker is truly an intern or an employee.

In California, there is no statute or regulation that expressly exempts persons participating in trainee or internship programs from the wage and hour laws. Nonetheless, the California Division of Labor Standards Enforcement (“DLSE”) has historically recognized the special status of trainees and interns who perform work as part of a bona fide educational or vocational program. Interns and trainees that meet certain criteria established by the DLSE are therefore not considered employees under California law, and are not entitled to the rights afforded employees under California’s wage orders. As a result, qualified interns and trainees do not have to be paid minimum wage or overtime wages.

In order to determine whether a trainee or intern program meets the DLSE criteria, an employer must apply a six-factor test. Those six factors are:

  1. The training, even though it includes actual operation of the employer's facilities, is similar to that which would be given in a vocational school.
    The program need not be actually administered by an educational or vocational school, as long as the training is similar to that which a vocational school would provide. The intern or trainee may use the company’s facilities and equipment, as long as the use of such facilities and equipment is directly related to the educational and vocational objectives of the program.
  2. The training is for the benefit of the trainees, interns or students. An intern can receive college credit for the internship, even if it is not a required program. Interns must derive more that just “some” benefit from exposure to the workplace, so as to enhance their marketability in their chosen vocation.
  3. The trainees or students do not displace regular employees, but work under their close observation. The “totality of the circumstances” is evaluated to determine whether or not a regular employee will be “displaced” by the intern or trainee. The purpose of this factor is to prevent employers from hiring “interns” to replace regular employees, thereby avoiding the wage and hour laws that apply to employees. If the intern or trainee performs work that might otherwise be done by regular employees, this may be considered unacceptable displacement unless the work:
    • is minor or incidental;
    • does not impede or replace the vocational objectives of the internship;
    • does not unreasonably intrude into activities that normally would be done by employees;
    and
    • is closely supervised.
  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. Typically, when the intern or trainee receives the greater benefit of the internship or training program, an employment relationship will not be found to exist. The key component of this factor is whether any benefit the employer receives is immediate. For instance, an immediate benefit will be found if regular employees are displaced with interns. By contrast, substantial supervision of an intern will tend to offset any immediate economic advantage to the employer.
  5. The trainees or interns are not necessarily entitled to a job at the conclusion of the training period.
    The DLSE recognizes that employers may offer training programs to train novices in their own business practices, or to assess potential employees. While hiring of some interns after their training is complete is expected, the criteria and acceptance procedures for the internship program should not be used as a substitute for the company’s regular employee application and screening process.
  6. The employer and the trainees or interns understand that the trainees or interns are not entitled to wages for the time spent in training. Interns or trainees may receive a stipend. Payment of a stipend does not create an employee relationship, as long as it does not exceed a reasonable approximation of expenses incurred by the intern. However, interns cannot receive wages, including credit toward fees or other types of compensation.

Internships can be a great way for individuals to obtain work experience and training, and can provide a useful service for employers. Employers who wish to provide true internship opportunities should follow the DLSE guidelines in order to ensure that their workers are not inadvertently classified as employees.


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