I’ll be on Nonprofit Radio this Friday at 10:00 am PT / 1:00 pm ET discussing with host Tony Martignetti what nonprofits need to know about unpaid interns and recent developments in the law. Catch us live on Talking Alternative or a few days later on iTunes.
Many nonprofits (and for-profits) make use of unpaid interns without an understanding of the laws designed to ensure workers’ rights. Organizations cannot simply hire and not pay “interns” if these individuals would legally fall within the definition of employees. Employees have certain rights, including the right to a minimum wage. Unfortunately, the laws in this area have been confusing to understand and subject to changes based on certain court cases. And there have been major changes in the past couple of years nonprofits that hire unpaid interns should be aware of.
Past Guidance (from a previous blog post)
Volunteer, Intern or Employee?
At first blush, it might seem simple to distinguish between a volunteer and an employee. But such distinction gets much more difficult to make when an organization pays a “stipend” to the volunteer. If the stipend is compensation for services, the paid individual may not be a volunteer and, if the payment is for regularly rendered services, may be an employee. Improper classification can raise many of the same issues described above for improperly classifying an employee as an independent contractor.
It is possible that the payment of a stipend to a volunteer may not convert the volunteer to an employee if the stipend is considered a reimbursement of certain types of expenses, a de minimis fringe benefit, or a nominal fee for service. Note that a Wage and Hour Opinion Letter (FLSA2006-28) expressed that the Department of Labor will presume that a fee paid to a volunteer is nominal as long as the fee does not exceed twenty percent of what an organization would otherwise pay to hire a full-time employee for the same services. However, organizations paying stipends to volunteers should confer with an employment/tax attorney for counsel regarding these issues.
A person receiving payment from a nonprofit may also fall under the classification of intern. Interns are also not employees and not subject to minimum wage and overtime laws under the FLSA [Fair Labor Standards Act] if they meet the 6-factor test. See Fact Sheet #71: Internship Programs Under The Fair Labor Standards Act and Legalities of Nonprofit Internships (Blue Avocado), which discusses the practical difficulties of meeting factor 4 (“The employer that provides the training derives no immediate advantage from the activities of the intern; and on occasion its operations may actually be impeded”). Under the FLSA, a person working in a part of the nonprofit that is considered a commercial (unrelated business) activity will not be recognized as a volunteer.
Department of Labor’s 6 Factor Test
The Department of Labor (DoL) has provided guidance to employers by publishing a 6-factor test. For a for-profit employer, all 6 factors must be met:
- The internship, even though it includes actual operation of the facilities of the employer, is similar to training which would be given 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 that provides the training derives no immediate advantage from the activities of the intern; and on occasion its operations may actually be 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.
However, the FLSA makes a special exception under certain circumstances for individuals who volunteer to perform services for a state or local government agency and for individuals who volunteer for humanitarian purposes for private non-profit food banks. The DoL also recognizes an exception for “individuals who volunteer their time, freely and without anticipation of compensation for religious, charitable, civic, or humanitarian purposes to non-profit organizations.”
Unpaid internships in the public sector and for non-profit charitable organizations, where the intern volunteers without expectation of compensation, are generally permissible. WHD is reviewing the need for additional guidance on internships in the public and non-profit sectors.
in 2015, the 2nd Circuit (NY, CT, VT) vacated a District Court’s decision in Glatt v. Fox Searchlight Pictures, Inc. (the “Black Swan” unpaid intern case) and established what appears to be a more employer-friendly 7 factor test relying heavily on who is the primary beneficiary of the relationship – the organization or the worker:
- 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 an intern is an employee—and vice versa. [This single factor might be sufficient for nonprofit charitable organizations.]
- 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 commitment 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.
On August 24, 2016, a court in a case called Wang v. The Hearst Corporation used the Glatt standard to dismiss a unpaid intern lawsuit. The 11th Cir. (AL, FL, GA) also adopted the 2nd Cir. approach. Notwithstanding these decisions, the DoL has not amended its 6-factor test and may wait to see how other Circuits decide.
- Get a signed writing from an unpaid intern about the position being an uncompensated, non-employee position.
- Do not merely fill an employee position with an unpaid intern; a new position should be created that incorporates the internship factors.
- Create and include in the internship educational sessions unrelated to accomplishing the day-to-day operational goals of the nonprofit.
- Train supervisors of unpaid interns on the differences in managing interns vs. employees (emphasis on education and training and accommodating school schedules).
- Require proof of academic credit eligibility in advance of hiring the unpaid intern.
- Assess and limit the intern’s day-to-day operational duties and tasks that are not directly related to the educational goals, particularly those that are menial.
- Limit the length of an intern relationship.
- Nonprofit Interns (National Council of Nonprofits)
- Volunteers and Interns (Law For Change)
- Employee or Volunteer: What’s the Difference? (Nonprofit Risk Management Center) – includes a discussion of the issues created by having an employee also volunteer for his or her employer. Note that if the employee ever says he or she was coerced to volunteer (a possibly very significant risk if the employee is ever terminated or disgruntled), the organization may face serious legal troubles.
- Federal Judge Tosses Unpaid Intern Claims: Four Takeaways—and Good News—for Nonprofit Employers with Internship Programs (Venable LLP)
- Internships Are Not a Privilege (NY Times Opinion – Darren Walker, President, Ford Foundation)