When Employers Need to Pay Wages

Hiring students for temporary unpaid internships, while feasible, is laden with potential legal pitfalls for the unwary and uninformed. See, e.g., “The Unpaid Intern, Legal or Not,” The New York Times, April 2, 2010.

Employers must pay at least minimum wage to any worker who provides any labor and services to that enterprise.   An employee cannot agree to waive his or her right to minimum wage.  Such an agreement is void and unenforceable.

California Division of Labor Standards and Enforcement (DLSE) and the US Department of Labor (DOL) each have detailed guidelines for qualifying unpaid interns as exempt from the wage requirement.

Our article “An Employer’s Guide to New 2011 Laws” covers the six stringent California DLSE criteria:

• The intern’s training actions must be similar to those a student would carry out in a vocational school;
• The training is for the benefit of the trainee;
• The trainee does not displace regular employees, but works under close observation;
• The company derives no immediate advantage from the trainee’s actions and on occasion may have its operations actually impeded;
• The trainee is not necessarily entitled to a job at the completion of the training period; and
• The employer and the trainee understand that the trainee is not entitled to wages for the training time.

The federal DOL’s fact sheet lists six similar requirements:

• The internship, even though included in the actual operation of the facilities of the employer, is similar to training 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 derives no immediate advantage from the training activities of the intern and, on occasion may have its operations 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.

In essence, the DOL and DLSE each maintain that for an internship to be unpaid, it must be educational and predominantly for the benefit of the intern and not the employer.

The distinction between employees and interns is of course important for many issues besides minimum wage.  Among other things, a business is obligated to provide employees with meal breaks and rest periods.  While it’s a very good idea to include interns on meal break and rest period routines,  it is not technically a violation of the law if a company does not provide them in the same manner as for employees.

It’s also a good idea to check with the company’s carrier to see if the business can add interns to the workers’ compensation coverage and, if not, to confirm other insurance coverage for on-premises injuries.

An experienced attorney can help you sort out this sometimes tricky area.