California Law – Employer Intern Programs

Do I Have to Pay My Interns in California?

Internships are right of passage for many American workers. According to recent data about 75% of students at four-year colleges undertake at least one internship. Many of those internships are unpaid. That raises a substantial legal question about failing to treat “interns” as employees.

Federal courts are conflicted about the law regarding unpaid interns. But, California has established a clear set of guidelines about when an “intern” must be paid the minimum wage and provided with employment benefits.

The Federal Department of Labor has articulated six key factors which must be met in order to avoid having a “trainee” classified as an employee.

The 6 Key Factors from the Department of Labor (DOL) are:

  1. internship is similar to training which would be given in an educational environment
  2. internship experience is for the benefit of the intern
  3. intern does not displace regular employees but works under close supervision
  4. employer derives no immediate advantage from the activities of the intern and
  5. occasionally will be impeded by the intern
  6. intern is not necessarily entitled to a job at a conclusion
  7. employer and intern understand the intern is not entitled to wages for the time spent.

Although it seems reasonably straightforward, federal appellate courts have been inconsistent in interpreting these factors.

California Law Regarding Interns

That brings us to California law. California intern law has been evolving. But, it seems to be adapting the DOL (Department of Labor) approach. However, there have been a few twists and turns. For example, the Division of Labor Standards Enforcement (DLSE or Labor Commissioner) published an eleven factor test to determine whether an intern is subject to minimum wage. However, two years later The DLSE reputed that approach admitting that the five additional factors do not appear to be based on any source, statute, or regulation. So, California employers wanting to steer clear of wage/hour liability should ensure that unpaid interns meet all of the six factors annunciated by the DOL.

Must Provide Training Similar to What They Would Get In School

This factor is met if the employer’s facilities provide resources not necessarily available to the intern outside of an industrial or professional setting. For example, for this factor to be satisfied the intern’s use of the employer’s computers, Network Systems, and tools to perform tasks must be directly related to the training and the educational and vocational objectives of the program. It’s easy to see how employers would fail to comply with this factor when they have interns performing tasks like grabbing coffee, making photocopies, and running errands.

Must Benefit the Intern and Not Benefit the Employer

These are two factors. But, they are really two sides of the same coin.

FIRST and foremost – the interns must benefit from the training being offered. Courts have required that the benefit be closely tied to the intern’s education. The DLSE found this factor met when the internship training activities and additional other services provided by the program during the internship appeared to be directly tied to the core components of the educational objectives of the interns. If the intern receives school credit for time spent, then the argument is much stronger.

SECOND – It is not enough for the interns to just benefit from the training. The company must also show that it receives no immediate advantage from the intern’s work. When an intern performs necessary work, that the employer would otherwise have to pay an employee to perform, the employer receives an immediate benefit from the intern’s services. The DLSE says any such limited benefit is counterbalanced by impediments to the employer’s operations in both time and economic costs in teaching the intern the activities, reviewing any work performed as well as immediate economic cost of the business in participating in the program.

Interns Can’t Replace Employees

If the educational goals or objectives of an internship program include exposure to the real world working environment, “occasional or incidental other work by the intern should not defeat the exemption so long to such work does not unreasonably replace or impede the educational objectives for the intern and effectively displace regular workers.” So, an employer cannot routinely use unpaid interns for clerical or administrative work. “The actual role of the trainee must be one which necessarily requires close supervision rather than performing substantial independent work which can be performed by regular workers.” Any internship program where the interns perform work on their own, with little or no supervision, will likely run afoul of this requirement.

No Auto Job and No Wages

These factors a relatively straightforward and easy to meet. But, both should be clarified, in a written agreement between the intern, the employer, and the educational institution. You shouldn’t use an unpaid internship as a “trial period” for individual seeking employment after the internship.

Bottom Line for California Employers with Intern Programs

California employers, who are interested in establishing an internship program, should focus on meeting all six of the DOL factors in order to avoid liability for filling treat interns as employees.

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