WANTED -- A FEW GOOD INTERNS. PAY NOT INCLUDED.

A Summary of California Rules Governing Unpaid Interns and Trainees

By Robert S. Nelson, Esq.

Nelson Law Group

In a recent Craigslist want ad, the poster warned that candidates for a vacant internship position needed to be able to travel internationally. There was only one catch: it had to be on the intern's own dime. "[Travel] will be at your own expense," the ad stated flatly. "Lunch and...[school] credits. No other pay. Money-whiners and over-qualified individuals need not apply."

Scroll through other postings and a similar pattern will emerge: Interns are expected to possess all-star abilities and put forth Herculean effort, yet they are offered little to no pay in return for their work. And while this arrangement may sound great for employers, it is in fact fraught with potential problems and vulnerabilities. Minor and/or unintentional non-compliance with the sophisticated laws and regulations that apply to intern relationships can subject employers to liability for overtime and/or minimum wage violations. Employers therefore should keenly understand these rules before allowing anyone to work as an unpaid intern.

1. Interns v. "Trainees"

Employers generally use the term "intern" to apply broadly to anyone who is: (1) not being paid for his or her work, either at all or at the regular rate that normally would be paid to an employee performing the same tasks; and (2) still in school during the time that he or she is working (i.e., the "internship" period). In fact, intern is a specific term-of-art that means anyone who already holds an advanced degree in medicine (either general or veterinary) and is working in a resident or internship program pursuant to the practice of their respective medical profession (i.e., medical interns like the characters on the TV show "Scrubs"). People meeting these criteria are generally exempt from overtime and minimum wage rules.

There is a second category of intern-like workers who, under appropriate circumstances, can also be exempt from state and federal overtime and minimum wage requirements. These workers, called "trainees," may be in any field or profession, not just medicine. Most un- or low-paid student workers in California are in fact trainees rather than interns. In valid trainee arrangements, employers will not be required to pay minimum wages and/or overtime because the trainees will not be considered to be employees, hence minimum wage and overtime rules will not apply.

2. Trainee Rules

As with interns, a defining characteristic of trainees is that they generally receive little to no monetary compensation for their work. Consequently, the California Division of Labor Standards Enforcement ("DLSE"), which enforces the state's wage-and-hour laws, will carefully scrutinize trainee arrangements to ensure that they are really valid work-for-education exchanges, rather than just pretexts by which employers can avoid having to pay employees. When gauging the validity of trainee arrangements, the DLSE will generally look at 11 different criteria, all of which must be met in order for the education-in-lieu-of-pay relationship to be upheld. Those criteria are:

• The work that trainees perform, even if it includes operation of the employer's equipment or facilities, must be similar to that which they would otherwise perform in a vocational school or program.
• The work must be primarily for the benefit of the trainees, rather than the employer.
• Trainees must not displace regular employees in performing the work.
• The employer cannot derive any immediate advantage from the work of the trainees (in fact, employers' operations should to some extent be impeded by the trainees' presence).
• Trainees cannot be guaranteed a paying job at the conclusion of their training period.
• The trainees clearly understand that they are not entitled to wages for their work time.
• The work the trainees perform must be an essential part of a valid educational curriculum that the trainees are actively enrolled in.
• Trainees cannot receive employee benefits.
• The training work must be general enough so that it prepares the trainees for work in any similar business, rather than being so specialized that it only qualifies the trainee for a job with the particular employer.
• The screening process for the training job cannot be the same as that used for regular employees (i.e., applicants should not think they are applying for paying jobs).
• Advertisements for the training jobs must clearly indicate that they are not for paying work.

Generally, the more a trainee job resembles a traditional job, the less likely it will be upheld as a valid education-in-lieu-of-pay arrangement. To increase the chances that trainee jobs will be upheld, employers should make sure that the jobs consist mainly of substantive training work, rather than just menial or administrative tasks. Trainees also must be enrolled in educational and/or vocational programs that are relevant to their training work (e.g., newspaper interns must be presently enrolled in journalism programs) at the time the work occurs. Employers likely cannot enter into valid trainee relationships with people who either are not presently in school, or who are not enrolled in classes and/or programs that are unrelated to their training work.

3. What Should Employers Do?

The DLSE generally disapproves of unpaid training arrangements and will invalidate those arrangements where it is either doubtful or unclear whether all of the above-noted criteria have been met. When trainee arrangement are invalidated, employers can be held liable for various damages and penalties, including: (1) the difference between what a trainee was paid per hour that he or she worked (if anything), and the applicable minimum wage; (2) time-and-a-half and/or double time pay for all hours the trainee worked in excess of 8 hours in a single day, in excess of 40 hours in a single week, or on the 7^th consecutive day of work; and (3) fees ranging from $100 to $250 per each trainee who was not paid proper minimum wages and/or overtime, per each pay period that the trainee(s) was/were not properly paid.

Given the significant risks associated with training arrangements, employers would be wise to do the following before hiring any unpaid trainees:

• Carefully consider whether a trainee arrangement is in fact the best thing to do. Some human resource experts believe that unpaid intern/trainee arrangements are in fact bad for employers because they eliminate motivation for trainees to do a good job, disillusion and/or embitter trainees against their respective workplaces, and create unrealistic expectations about what it really means to work.
• Ensure that all of the above-noted criteria are complied with before any trainees are hired or recruited. Advertisements are an important factor in determining whether trainee arrangements will be upheld, hence employers should already be confident that their trainee arrangements are compliant before they even begin soliciting for candidates. Where employers are unsure whether planned arrangements will comply with all the rules, they can solicit the DLSE for advisory opinions whether planned arrangements will in fact be valid.
• Execute clear, written agreements with trainee candidates. This is the most effective way to make sure that trainees clearly understand that they will not be paid wages for their training work.
• Closely monitor and supervise unpaid trainees. This will help ensure that they do not jeopardize their trainee status by performing too much employee-type work (e.g., menial and/or purely administrative tasks, work unrelated to their educational programs, etc.). Also, given that trainees often tend to be young and unsophisticated, they are particularly susceptible to harassment and other workplace problems.

Robert S. Nelson is the founder of the Nelson Law Group, a San Bruno, California based law firm specializing in labor and employment matters. He can be reached at (415) 689-6590, or rnelson@nelsonlawgroup.net.

[1] Certain school-teachers-in-training are also considered to be interns, per se.