Many not-for-profit enterprises and a few for profit entities utilize student interns to supplement their work forces. With the California Division of Labor Standards Enforcement (“DLSE”) cracking down on what it refers to as “wage theft,” concern has risen that those utilizing student interns will be subject to action based on the theory that the interns are, in actuality, employees entitled to all the benefits set forth in the federal Fair Labor Standards Act (“FLSA”) and the California Labor Code.
Federal law has established guidelines that determine when a person performing services may properly be classified as a student intern, and therefore exempt from the Fair Labor Standards Act (the “FLSA”), including its minimum wage provisions, and when said persons must be considered employees and thus subject to the FLSA. Such a determination is made by application of the “primary beneficiary test” which examines the “economic reality” of the intern-employer relationship to answer the question of whether the student or the hiring entity is the “primary beneficiary” of the relationship. Benjamin v. B & H Educ., Inc., 877 F.3d 1139, 1146 (9th Cir. 2017). If the application of that test results in a finding that the student intern is the primary beneficiary, he or she is not an employee and therefore, not subject to protections of the FLSA. Ibid. The requisite analysis requires the weighing and balancing of the following seven non-exhaustive factors:
- The extent to which the intern and the employer clearly understand that there is no expectation of compensation. Any promise of compensation, express or implied, suggests that the intern is an employee – and vice versa.
- The extent to which the internship provides training that would be similar to that which would be given in an educational environment, including the clinical and other hands-on training provided by educational institutions.
- The extent to which the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit.
- The extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic calendar.
- The extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning.
- The extent to which the intern’s work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern.
- The extent to which the intern and the employer understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship.
California law appears to be in accord with federal law in this area. As one U.S. District Court acknowledged, “[a]lthough California law defines the scope of the employment relationship more broadly than [federal law] there is no indication that California courts have or will depart from federal law on this issue.” Ford v. Yasuda, 2017 U.S. Dist. LEXIS 211042. The DLSE has indicated that “[s]tudents who perform work in the course of their studies, as part of the curriculum, are not employees if they receive no remuneration or credit toward school fees.” (DLSE Policies and Interpretations Manual (revised March 2006), § 43.6.8.)
Additionally, a DLSE Opinion Letter dated April 7, 2010, notes that the “DLSE has historically followed federal interpretations which recognize the special status of trainees and interns who perform some work as part of an educational or vocational program.” (DLSE Opinion Letter 2010.04.04.) The letter goes on to state that “it is reasonable and appropriate for the DLSE to look to the factors used by the Department of Labor in determining the exemption for purposes of coverage of state minimum wage coverage for trainees/interns in the absence of a state statute or regulation on the matter.” Ibid. As a result, it is reasonable to assume that, with respect to student interns, the DLSE and ultimately California courts will adopt the holding of Benjamin v. B & H Educ., Inc., as the law in California.
Notwithstanding its open policy regarding students who perform work in the course of their studies as part of the curriculum, the DLSE has determined that students nominally designated as interns who “performed administrative and clerical work in addition to their [ ] training, received little or no supervision, displaced regular workers, and functioned as an integral part of the operation of the [hiring entity]” and thus, went “beyond a mere training experience which resulted in economic benefit to the [hiring entity]” (DLSE Policies and Interpretations Manual (revised March 2006), §46.6.4, citing DLSE Opinion Letter 2000.05.17.) Consequently, entities utilizing student interns must exercise caution with respect to what duties are assigned to said interns.
Organizations that engage student interns should take care to ensure that there is a meaningful educational experience for the intern. This requires both proper planning and monitoring of its student interns and their role in the company. In particular, a well-designed program should do all of the following:
- Accommodate the intern’s academic commitments by corresponding to the academic calendar;
- Coordinate with the student’s educational institution to align course curriculum with internship experiences;
- Ensure the intern complements, rather than displaces, the work of paid employees; and
- Provide and document any significant educational benefits to the intern.
Here are some recommendations for entities that wish to be a part of a student internship program while minimizing the likelihood of having student interns classified as employees:
- The recruitment of interns should include a communication of the seven factors set forth in the Benjamin decision to any prospective interns.
- Interns should execute a clear, written acknowledgement that he or she expects neither compensation for the work performed as an intern nor the entitlement to a paid position at the end of the internship.
- Interns should be closely monitored to ensure they do not jeopardize their status as interns by performing too much administrative work or too many menial tasks unrelated to their educational programs. (i.e., the days of treating interns as “gofers” is over.)
As always, you should seek definitive legal guidance from an attorney to ensure compliance with existing law. At Cohen Durrett, LLP, we have over 30 years of experience with labor and employment matters and are happy to assist you.