Human Resource & Labor News
www.agc.orgApril 23, 2010 / Issue No. 2-10
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On the Inside
DOL Issues Guidance on Use of Unpaid Interns
Labor Department Campaign Encourages Workers to Report Employers That Violate Worker Rights
Wages & Benefits
COBRA Subsidy Extended to May 31, 2010; May Be Extended Yet Again
The Health Care Reform Bill Is Final... Now What?
Online Compensation Reports Now Available to AGC Members with Six-Month Free Trial
2009 Collective Bargaining Yields Lowest Increases in 13 Years
Labor Relations
Final Rule on Federal PLAs Gives Agencies Broad Discretion
NLRB Recess Appointments Signal Labor Policy Changes Ahead
Open Shop Contractors Discuss Labor Developments at AGC Convention
Building Trades President Outlines Political and Business Priorities at AGC Convention
John Flynn Retires as President of Bricklayers, Succeeded by Jim Boland
Hiring & Firing
Tax Incentives Expected to Encourage Hiring; Seasonal Hires Qualify
Professional Development
WEBINAR: Advanced Issues about Worker Misclassification: What Every Construction Contractor Needs to Know
Construction Labor Law Developments Covered at AGC's Annual Symposium
Web-Based Collective Bargaining Seminar Now Available 24/7
DOL Issues Guidance on Use of Unpaid Interns

As employers struggle keep business operating expenses low, the number of unpaid internships has increased in recent years, causing the federal government to express concern that employers may be unknowingly violating wage and hours laws when using unpaid interns.  While the U.S. Department of Labor (DOL) continues to enforce wage-hour laws, the agency is digging deeper with the announcement of its desire to eliminate the unlawful use of unpaid interns by "for-profit" companies.  The problem is that most "for-profit" companies that use unpaid interns may not be aware they are violating wage and hour laws, leading DOL to issue guidance on the subject. 

Students often seek out opportunities for unpaid internships in order to gain valuable experience relative to a particular career ambition and for many employers, this practice is a welcomed one as budgets remained strained and the cost of employing additional workers continues to increase.  But according to a Fact Sheet issued by DOL in April 2010, "internships in the 'for-profit' sector will most often be viewed as employees," and those who "qualify as employees rather than trainees typically must be paid at least the minimum wage and overtime compensation for hours worked over forty in a workweek."  So, with a few exceptions for work performed as a part of an education program, "for-profit" companies will be required to pay interns for any work performed, and offer additional protections extended to employees, such as workers compensation, unemployment insurance, and protection under employment discrimination laws.

According to DOL, a worker for a "for-profit" company may be considered for an unpaid internship only if all of the following six criteria are met: 

  1. The internship, even though it includes actual operation of the facilities of the employer, is similar to training that would be given in an educational environment. DOL explains that the more an internship program is structured around a classroom or academic experience as opposed to the employer's actual operations, the more likely the internship will be viewed as an extension of the individual's educational experience. Specifically referenced is oversight of the program by a college or university where educational credit is provided.  
  2. The internship experience is for the benefit of the intern.
  3. The intern does not displace regular employees but works under close supervision of existing staff. This also includes temporary work done by the intern. For example, if the intern fills in for the receptionist or any other regular worker during specific time periods or when the regular employee is on vacation or sick leave, then the intern status will be lost. In addition, if the employer would have hired an employee to perform the work that an intern is doing, the intern must be declared an employee. DOL specifically states that if the intern "performs no or minimal work, the activity is more likely to viewed as a bon fide education experience" and if the intern receives the same level of supervision as the regular employees, it is likely that the intern is actually an employee as well. 
  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. The agency describes the work that an intern can perform; specifically stating that the work should not be routine work of the business on a regular and recurring basis, and the business should not be dependent on the intern. If the intern is engaged in such work as filing, clerical work, or assisting customers, then the employer would be considered the beneficiary of the intern's work and must therefore declare the intern an employee. 
  5. The intern is not necessarily entitled to a job at the conclusion of the internship. The internship should be limited to a specific period of time that is determined before the start of the internship, and should not be used as a working interview or trial period for those seeking employment.
  6. The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

If the internship meets all of the criteria listed above, then an employment relationship does not exist and the intern can work, unpaid, for the duration of the internship.  Like with most wage-related claims, employers that are in violation may be subject to both federal and state penalties as well as worker lawsuits. 

Employers that use unpaid interns are encouraged to use the six criteria listed above in order to determine the correct status of interns.  As a general practice, add a completed checklist (completed by the HR Manager or the requesting supervisor) to each eligible unpaid intern's file once their status has been confirmed along with a copy of the intern's learning curriculum and expectations.  For quick access, you might also want to keep a separate binder specifically for this information.  This may help to show that you made a "good faith effort" to determine the appropriate status of the worker.  If uncertainty exists, or for a review of your company's complete internship program, it is recommended that you contact an employment law attorney licensed to practice in your state, who is also familiar with the wage-hour issues of employers.
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