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EMPLOYMENT ALERT: MAY FOR-PROFIT, PRIVATE SECTOR CALIFORNIA EMPLOYERS USE THE SERVICES OF UNPAID INTERNS?

June 12, 2013

The Question: May a for-profit, private sector California company use the services of unpaid interns?

The Answer: Yes . . . under limited circumstances.

The Legal Issue: Are unpaid interns subject to minimum wage and overtime laws? There is no California statute or regulation which expressly exempts persons participating in an internship program from minimum wage and overtime laws. Nevertheless, California has adopted the six-part test utilized by the federal government and federal courts to determine whether an individual is an "employee" covered by minimum wage and overtime laws or an intern who is not.

Under the California Division of Labor Standards Enforcement ("DLSE"), which follows the U.S. Department of Labor guidelines, there is a six-part test for determining whether an "intern" or "trainee" is exempt from minimum wage and overtime laws.

Generally speaking, an individual whose work serves only his or her own interest is not considered an employee despite the fact that a company provides aid or instruction if the following six (6) criteria are satisfied:

(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;

(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;

(5) The trainees or students are not necessarily entitled to a job at the conclusion of the training period; and

(6) The employer and the trainees or students understand that the trainees or students are not entitled to wages for the time spent in training.

If all of the above factors are met, there is no employment relationship created and minimum wage and overtime laws do not apply to the intern.

Tips for Companies - Do's and Don'ts of Internship Programs:

(1) Do involve a school in the oversight of the internship program. Colleges and universities often provide educational credit for "field-work" internship and training programs.

(2) Do provide and teach employment skills suitable to a variety of settings as opposed to skills particular to your own company.

(3) Do give interns the opportunity to "shadow" or follow around employees under an employee's close and constant supervision. This permits the intern to learn a job function rather than be responsible for a particular job or service.

(4) Don't use interns as substitutes for regular paid workers or to augment the work force at specific times of the year. For example, if your company needs additional personnel during the summer months and you have interns perform the work, then the interns will be considered employees and must be paid.

(5) Do make the internship for a fixed period of time that is set before the internship starts. For example: a summer internship or winter break internship.

(6) Don't use the internship as a "trial period" with the person's expectation of a job with the employer if his or her work is satisfactory. A "trial period" intern will most likely be considered an employee and subject to wage laws.

Note: This Alert is designed to provide a summary of general information. It does not state the entire scope of the laws covering internships. Further, it does not offer solutions to individual problems. Employers with specific questions concerning internships should consult legal counsel.

Kenneth J. Sargoy, Esq. provides assistance and representation in connection with employment matters. Questions about internships and training programs as well as other employment matters may be directed to Kenneth J. Sargoy, Esq., telephone toll free 310-208-1003 or 310-472-7113 or to his e-mail, ken@sargoylaw.com. THIS EMPLOYMENT ALERT CONSTITUTES ADVERTISING UNDER APPLICABLE RULES OF PROFESSIONAL CONDUCT.

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