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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 that expressly exempts people 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) Even though it includes procedure of the employer’s facilities, the training is comparable to what would be offered in a vocational school

(2) Students or trainees benefit from the training

(3) Students or trainees work under close observation of regular employees and do not replace them

(4) The employer obtains no instant benefit from what the students or trainees do, and the employer’s operation may, at times, be hindered

(5) There is no job guarantee for the students or trainees when their training is finished

(6) There is an understanding between the employer and students or trainees that they are not entitled to pay for the training period

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 workforce 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. toll-free number at 310-208-1003 or or contact him. THIS EMPLOYMENT ALERT CONSTITUTES ADVERTISING UNDER APPLICABLE RULES OF PROFESSIONAL CONDUCT.