What You Need to Know About Overtime Laws for Unpaid Internships

Posted on August 30, 2018 | Wage & Hour Laws

The Fair Labor Standards Act (FLSA) dictates how employers can pay its employees. Any for-profit business must pay its employees a fair wage. Students and unpaid interns are not considered employees by the FLSA, so they are exceptions to this rule regarding employee compensation. Knowing the difference between a paid employee and an unpaid intern position could save a business thousands of dollars in fees.

How to Know If You Are an Unpaid Intern

The primary beneficiary test is a checklist to determine if a job meets the requirements for an employee position, or if the FLSA considers the position an internship. The test determines who is actually benefiting from the job opportunity. In the case of an internship, the primary beneficiary should be the intern who is learning important job skills. The test has seven factors:

• Is there a clear understanding between the employee and the employer about the position being unpaid? Any promise of compensation turns an intern position into an employee position.
• Does the position provide educational training similar to a training program or an educational facility? This includes clinical and hands-on training opportunities.
• Does the intern receive academic credits for participation in this position? Or is coursework required for the position?
• Does the schedule of the position shadow the school calendar?
• Is the position for a limited amount of time to allow the intern to gain a specific skill or skill set?
• Does the position require the intern to work with other paid employees in order to learn from them? Or is the intern working in a stand-alone position?
• Does the intern understand there is no promise or entitlement to a paid job opportunity at the end of the internship?

If two or more of these factors are present, the position is usually considered an internship or student position. Sometimes a case will present with unique circumstances, and additional factors will help determine the nature of the position. A volunteer who willingly gives his or her time to a cause without compensation is an example of this type of arrangement.

What Is Overtime?

In the state of California, any employee who works time above and beyond a normal workweek must receive extra compensation in the form of overtime. A normal workweek is 8 hours per workday, or 40 hours per workweek. Anything above and beyond qualifies for overtime.

If an employee works more than eight hours, but less than 12 hours in one day, or works the first eight hours of the seventh consecutive day of the workweek, his or her employer must pay them time and a half. If the employee works more than 12 hours in a single day or more than eight hours on a seventh consecutive day of the workweek, the employer must pay double the employee’s salary for the extra hours.

Exemption From Overtime

Unpaid interns are exempt from the overtime law, according to the FLSA. This means if an intern exceeds the workweek requirements, the employer is not required to compensate them with overtime pay. The intern is receiving training, so the compensation received is educational value.

You should consider contacting a lawyer if your business hires interns. Understanding the legal requirements for hiring interns is the key to making sure your positions comply with the FLSA laws. Employers who violate the FLSA employment laws receive stiff penalties; even if it was a misunderstanding, the mistake can cost your business thousands of dollars. A Los Angeles employment lawyer can help to define unpaid internships with proper legal language, resulting in clarity of the definition of the position for everyone involved.