Do Volunteers or Interns Have To Be Paid? New Guidelines!

We have received a number of calls lately on the issue of whether or not an employer has to pay “volunteers” or “interns.” We have cautioned against this practice based upon a case-by-case analysis of the facts. Volunteers, who may on occasion, work on a fund raising event do not have to be paid, but if they work consistently in the office they probably will have to be compensated.

There are many California companies who participate in unpaid internship programs where student workers obtain vocational training, and oftentimes school credit, while working without pay.  The issue often arises as to whether these interns have to be treated as employees subject to California and/or federal wage and hour laws.  On April 7, 2010, the California Department of Labor Standards Enforcement (“DLSE”) issued an Opinion Letter on this subject. 

The Opinion Letter highlights the fact that there is no state or federal statute or regulation which expressly exempts persons participating in an internship program from wage and hour laws. However, both state and federal case law has recognized that such an “internship” exemption exists.  According to both state and federal case law, a case-by-case factual inquiry must be made in order to determine if the exemption properly applies.  The U.S. Department of Labor has articulated the following six criteria, derived from the U.S. Supreme Court’s ruling in Walling v. Portland Co., 330 U.S. 148 (1947) to apply in making case-by-case determinations:

(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 or students;

(3) The trainees or students do not displace regular employees, but work under their close observation;

(4) The employer derives no immediate advantage from the activities of trainees or students, and on occasion the employer’s operations may be actually impeded;

(5) The trainees or students are not necessarily entitled to a job at the conclusion of the training period; and

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

Prior to this new April 7. 2010 Opinion Letter, the DLSE had used the above multi-factor test, as well as other multi-factor tests (including an 11-factor test and an alternate six-factor test).  The Opinion Letter now settles the internal controversy within the DLSE as to which test to use. The April 7, 2010 Opinion Letter concludes that the above six-factor test used by the U.S. Department of Labor is the proper test that should be used by the DLSE in interpreting applicability of California state wage-and-hour laws to interns.  The DLSE Opinion Letter is here. 

Interestingly, the United States Department of Labor has also issued a new fact sheet on unpaid internships, providing further guidance on this issue for employers.  The DOL fact sheet is here.