Question:

Has anyone been able to keep their interns on payroll without paying them at least $455 a week?
- Mathilda Christophe, University of Houston

Responses:

Only by classifying them as non-exempt and paying overtime.
- Glenn Tompkins, Purdue University

Well folks, I've had an education this week researching the intern question as related to FLSA and it hasn't been fun. Here is what I have found (and how you treat your situation should be checked with your state labor department regulations).

Federal - Wage & Hour Guidelines for Interns/Students:

According to the Wage and Hour Division, trainees or interns are NOT employees within the meaning of the FLSA if ALL six of the following criteria are satisfied:

1. The training, even though it includes operation of the employer's facilities, must be similar to that given in a vocational school.
2. The training must be for the benefit of the interns or students.
3. The interns or students must not displace regular employees but must work under their close observation.
4. The employer providing the training must derive no immediate advantage from the activities of the interns or students, and on occasion its operation should actually be impeded.
5. The interns or students must not necessarily be entitled to a job at the conclusion of the training period.
6. The employer and the interns or students must understand that the interns or students are not entitled to wages for the time spent in training.

In applying the criteria, the payment of a stipend or allowance that does not exceed a reasonable approximation of the expenses incurred by the intern or that serves as an allowance or subsistence, will not by itself establish an employment relationship. However, the Wage and Hour Division has indicated it will carefully scrutinize programs that do not lead to licensing, registration, or certification of some type. California - DLSE Guidelines for Interns/Students; However, for us lucky souls in California, the Division of Labor Standards Enforcement requires that the following additional requirements be met:

1. The clinical training should be part of an educational curriculum.
2. The students should not receive employee benefits.
3. The training should be general, so as to qualify the students for work in any similar business, rather than designed specifically for a job with the employer offering the program.
4. Upon completion of the program, the students should not be fully trained to work specifically for the employer offering the program, but should require further specific training for such employment.
5. The screening process for the program should not be the same as for employment and should not appear to be for that purpose; it should involve only criteria relevant for admission to an independent educational program.
6. Any advertisements for the program should be couched clearly in terms of education, rather than employment, although the employer may indicate that qualified graduations will be considered for employment.

Thus, in California, intern and fellowship programs will not qualify under California's Department of Labor Standards Enforcement's (DLSE) guidelines for student interns. The DLSE will not consider students working as interns or trainees as employees if the training is academically oriented and designed primarily for the benefit of the student. The DLSE requires that the training be an essential part of an established course of an accredited school or of an institution approved by a public agency to provide training for licensure. The program may not be for the benefit of any one employer, a regular employee may not be displaced by the intern, and the training must be supervised by the school or a disinterested agency. By contract, the DLSE considers interns, who are receiving general work experience education or on-the-job training, to be employees.

One option is to associate your intern program with a school to obtain students as part of established course work or as part of a graduate degree program. Otherwise, in California, the interns will be subject to California wage and hour laws. With that said, based on exempt duties, you may be able to classify interns under the administrative exemption; assuming all 5 of the criteria requirements are met. However, in Calfornia, the current annual salary threshold must be greater than $28,080 (much higher than the Federal salary threshold of $23,660) in order to avoid nonexempt classification and the payment of overtime.

Consult your labor experts in your locale to see if your state labor regulations for internship programs are more stringent than the Federal Wage and Hour Division. I know that some institutions pay their interns as employees, consider them nonexempt and eligible for overtime. It will be interesting times.
- Ben Jay, Pacific 10 Conference