On February 1, 2012, a former intern of Hearst Corp.’s Harper’s Bazaar filed a purported class action alleging that the company violated the Fair Labor Standards Act (“FLSA”) and applicable state law by failing to pay minimum wage and overtime pay to her and the other interns. 

Although the lawsuit is against a publishing company, it nonetheless highlights a growing trend in health care.  The economic downturn has led many job seekers to get their foot in the door anyway they can, even if it means interning without pay.  Indeed, as the complaint against Hearst Corp. asserts, “[u]npaid interns are becoming the modern-day equivalent of entry-level employees.”  Companies likewise find value in interns because they can train these individuals without incurring any costs, and then hire fully trained workers when they have a job opening.  But companies need to be very careful about their use of interns and volunteers or they could face significant wage and hour liability. 

The Department of Labor uses the following six factor test to determine whether an “intern” is actually an intern, as opposed to an “employee” who is entitled to compensation under the FLSA.

  1. The internship, even though it includes actual operation of the facilities of the employer, is similar to training which would be given in an educational environment;
  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;
  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;
  5. The intern is not necessarily entitled to a job at the conclusion of the internship; and
  6. The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

If the above factors are met, then the intern is not entitled to minimum wage or overtime under the FLSA.  The Department of Labor’s six factor test, when applied to the health care industry, can best be satisfied by following the best practices, which will help protect your company from liability.  First, ensure that the intern is receiving academic credit from an educational institution.  A recent graduate who offers to “intern” to gain experience and get his or her foot in the door is a red flag.  Second, do not use interns to displace employees in the schedule.  For example, if an LPN calls out sick, do not replace him or her on the schedule with an intern.  Interns should work alongside regular employees, not in place of them.  Third, an internship should not serve as a trial period prior to permanent employment immediately following the internship.  Fourth, the internship should be for a definite and fixed duration.

Finally, keep in mind that several states, such as New York, have their own tests to determine whether an “intern” is actually an “employee.”  To avoid wage and hour liability your company must comply with both federal and state laws.  Therefore, it is important to check state laws too, and not to just rely on the federal test described above.