April 18, 2010 Just In Time For Summer Break: The DLSE Revises Its Unpaid Intern Test

Summary

In a recent opinion letter, the Division of Labor Standards Enforcement (DLSE) abandoned its more onerous 11-factor test and adopted the intern test formulated by the United States Department of Labor (DOL) to determine whether interns and other "trainees" must be treated as employees under California's wage and hour laws.  If the interns or trainees are employees, they are entitled to minimum wage and overtime pay, meal and rest periods and other protections provided by applicable law.  The DLSE's opinion letter provides another opportunity for employers who use unpaid interns or other unpaid trainees to ensure that such individuals are properly categorized.

Details

Based on the new DLSE opinion letter, to properly categorize an intern or trainee as “unpaid” under California law, an employer must establish that its training or intern program meets the following six criteria:

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;

3. The trainees do not displace regular employees, but work under their close observation;

4. The employer derives no immediate advantage from the activities of trainees, and on occasion the employer's operations may actually be impeded;

5. The trainees are not necessarily entitled to a job at the conclusion of the training period; and

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

The DLSE's decision to abandon its prior 11-factor test may make it easier for California employers to prove that unpaid interns or trainees are properly classified.  However, employers must be very cautious because most unpaid programs fall short of the mark for a number of reasons, including the fact that interns or trainees often perform work that benefits the employer and not the intern, such as answering phones or making photocopies.  Conversely, if the intern or trainee receives academic credit or licensing for his or her participation in the employer's program, the employer may have a better chance of meeting the 6-factor test.

What This Means

Employers that provide unpaid trainee or intern programs should audit their programs to ensure that they meet each element of the 6-factor test.  Failure to properly classify these individuals could subject an employer to extensive penalties, including claims for unpaid wages, overtime, missed rest and meal periods and attorneys' fees and costs.

This E-Update was authored by Brenda Kasper, Lisa Frank and James Leonard II.  For more information, please do not hesitate to contact Ms. Kasper, Ms. Frank, Mr. Leonard or any other Paul, Plevin attorney by calling 619-237-5200.