CLIENT UPDATE

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January 18, 2011

New York Department Of Labor Issues Opinion Letter Clarifying Coverage Of Interns Under The New York Labor Law

On December 21, 2010, the New York State Department of Labor (“NYSDOL”) issued a detailed opinion letter clarifying whether an educational internship may qualify for an exception to the New York State Minimum Wage Act and other requirements of New York law and regulations.  The Minimum Wage Act applies to individuals who meet the statutory definition of “employee” and excludes from coverage individuals who are not in an employment relationship.  The NYSDOL opinion letter sets forth a rigorous 11-factor test to determine whether an employment relationship exists for interns and trainees.  This test adopts six criteria established by the U.S. Department of Labor, as well as five additional factors.  In order to be a true “intern” and exempt from the protections of the Minimum Wage Act, all 11 criteria must be satisfied.

The 11-Factor Intern/Trainee Exception Test

The 11-factor test examines the totality of the circumstances to evaluate the existence of an employment relationship.  The test focuses on characteristics of the internship program, the status of the intern/trainee, and the employer’s obligations with regard to the interns or trainees.

The Internship Program

  1. The training, even though it includes actual operation of the facilities of the employer, is similar to training that would be given in an educational environment.

 

While this factor does not require that the internship be directly administered by a vocational or educational institution, it will more likely be satisfied where the internship is structured around classroom instruction that provides skills that are applicable in multiple employment settings.  Offering educational credit also demonstrates training in an educational environment.

  1. The training is for the benefit of the intern.

 

This criterion requires that any benefit conferred upon the employer providing the internship must be merely incidental to the benefit provided to the intern or trainee.  In addition, while not determinative, the receipt of academic credit is considered evidence of the beneficial nature of the program.

  1. The training is general, so as to qualify the trainees or students to work in any similar business, rather than designed specifically for a job with the employer offering the program.

 

The skills offered in the internship or training program must be useful and transferable to any employer in the relevant field and should not be specific to the employer offering the program.  The NYSDOL has advised that any training that is specific to the employer and its operations conclusively indicates an employment relationship.

  1. The screening process for the internship program is not the same as for employment, and does not appear to be for that purpose, but involves only criteria relevant for admission to an independent educational program.

 

The employer’s internship selection process must be separate and distinct from the employment process.  The internship application should be more similar to that of an educational program, rather than an employment application. 

  1. Advertisements for the program are couched clearly in terms of education or training, rather than employment, although employers may indicate that qualified graduates may be considered for employment.

 

The NYSDOL has advised that advertisements, postings and solicitations regarding internships should describe the programs as an educational experience, and not employment opportunities.  If a stipend is offered in connection with the program, such advertisements should not characterize this stipend as wages.  This factor does not prohibit an employer from indicating that qualified graduates of the program may be considered for employment.

Intern/Trainee Status

  1. The interns do not displace regular employees and any work they may do is under close supervision.

 

Interns must not be used in lieu of regular employees.  Rather, participants in an internship program must be under close or constant supervision of regular employees and must perform no or minimal productive work.  A job shadowing program is a typical example of a program which satisfies this criterion.

  1. Any clinical training is performed under the supervision and direction of individuals knowledgeable and experienced in the activities being performed.

 

According to the NYSDOL, an individual with sufficient experience and knowledge to satisfy this factor is proficient in the area and in all activities to be performed by the intern or trainee; has adequate background, education and experience to fulfill the educational goals and requirements of the program; and is competent in providing training.

The Employer’s Obligations

  1. The employer who provides the training derives no immediate advantage from the activities of the trainees or students and, on occasion, operations may actually be impeded.

 

This factor is intended to ensure that the employer actual provides a benefit to the intern or trainee, and not vice versa.  An internship program that satisfies this factor will typically require a dedication of resources from the employer such as training and supervision that may actually detract from productivity.

  1. The trainees or students are not necessarily entitled to a job at the conclusion of the training period and are free to take employment elsewhere in the same field.

 

An internship program must be of a fixed duration that is established and communicated to the intern prior to the beginning of the internship.  Additionally, the program must not be connected with any offer of employment or promise of a permanent position with the employer at the conclusion of the internship.  The NYSDOL has emphasized that if an intern is placed with the employer for a trial period with the expectation of permanent employment, that individual will generally be considered an employee.

  1. The trainees or students do not receive employee benefits.

 

The receipt of employee benefits, such as health and dental insurance, pension or retirement credit, employer sponsored trips or parties, and discounted or free employer provided goods and services, conclusively demonstrates the existence of an employment relationship exists.  Interns or trainees who receive such benefits are considered employees.

  1. The trainees or students have been notified, in writing, that they will not receive any wages for such training and are not considered to be employees for minimum wage purposes.

 

This written notice must be clear and must be provided prior to the commencement of the internship.

Implications for Employers

Employers should examine their internship programs to ensure compliance with the 11 enumerated criteria.  We are available to assist you in this regard.  Employers with programs that do not satisfy the 11-point test must be sure to pay their interns or trainees at least the minimum wage (and any applicable overtime premium) for all hours worked. 

If you should have any questions regarding the NYSDOL’s clarification of internships and the possible exception from the New York State Minimum Wage Act or any other related issues, please contact us.