Remember that unpaid internship you were so lucky to snag in college? Well, according to both a federal judge in Manhattan and the US Department of Labor (“DOL”) that coffee-delivering-foot-in-the-door opportunity may have violated the Fair Labor Standards Act and entitle you to compensation. But what if you worked for a nonprofit?
The federal court decision deals with unpaid interns of a for-profit television corporation who claimed they were being used illegally under the Fair Labor Standards Act (“FLSA”). There are many news articles detailing that decision, but here is a little back story on the law. Way back in 1947, the U.S. Supreme Court in Walling v. Portland Terminal created a ‘trainee’ exception to the definition of ‘employ’ in the FLSA that essentially allows unpaid internships in certain conditions – no implied or express compensation agreement and the intern must be working for their own advantage not to the advantage of the entity. Then, in 2010 the DOL issued Fact Sheet 71 building on Walling by setting forth six factors whose satisfaction renders an unpaid internship exempt from FLSA requirements like minimum wage. The Fact Sheet explicitly mentions for-profits, but curiously, at the very end, has this concession in a footnote:
Unpaid internships in the public sector and for non-profit charitable organizations, where the intern volunteers without expectation of compensation, are generally permissible. WHD is reviewing the need for additional guidance on internships in the public and non-profit sectors.
Six Prong Test
No such “additional guidance” has been provided; however, in an Opinion Letter issued by the DOL, it believes the six prong test will apply to nonprofits. The six factors are:
- The Internship, even though it includes actual operations of the facilities of the employer, is similar to training that would be given in an educational environment;
- The Internship experience is for the benefit of the Intern;
- The Intern does not displace regular employees, but works under close supervision of existing staff.
- 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 (emphasis added);
- The Intern is not necessarily entitled to a job at the conclusion of the Internship; and
- The Employer and the Intern both understand that the Intern is not entitled to wages for the time spent in the Internship.
Keeping in mind every factor must be satisfied before the internship may be unpaid, look back at the fourth factor. How many unpaid internships did you do, or does your nonprofit currently oversee, that would satisfy it?
Before you get too nervous, a few things need to be made clear. The Manhattan case referenced above was decided by a federal judge, not the Supreme Court, so this is not the law of the land. Furthermore, nonprofits have a few advantages for-profits don’t.
Special Considerations for Nonprofits
Nonprofits have the advantage of being able to have ‘volunteers’. Now, you cannot just call your unpaid intern a ‘volunteer’; that in and of itself will not insulate your nonprofit from legal risks. But, carefully structuring their experience can help. According to the FLSA, an individual is a volunteer, not an employee, when the individual meets the following criteria:
- Performs hours of service for a public agency for civic, charitable or humanitarian reasons, without promise, expectation or receipt of compensation for services rendered. Although a volunteer can receive no compensation, a volunteer can be paid expenses, reasonable benefits or a nominal fee to perform such services;
- Offers services freely and without pressure or coercion, direct or implied, from an employer; and
- Is not otherwise employed by the same public agency to perform the same type of services as those for which the individual proposes to volunteer.
Ambiguity in your program is risky. Try the following, but if in doubt, consult an attorney:
- Have the intern sign an agreement at the start of the relationship clearly stating no compensation will be provided and setting out the duties and responsibilities to be performed are ordinary volunteer work and not a commercial enterprise.
- In writing, classify the status of the individual as an intern, volunteer, or trainee and have both parties sign the agreement.
- Know if, or how, your insurance covers interns.
- Clarify how the nonprofits’ policies apply to interns.
Any organization, for-profit or nonprofit, can avail themselves of the ‘trainee’ exception (the six prongs), but nonprofits have two advantages for-profits do not. One, there is some ambiguity whether the FLSA prohibits unpaid interns working with nonprofits and second, nonprofits can have volunteers. Whichever way you move forward, either aligning your intern program with the six-factors or carefully creating a volunteer relationship, set clear expectations and respect the intern enough to make sure the experience is as educational as possible. Do onto interns as your favorite boss did unto you.
This article was co-authored by Mackenzie Woods, a third year law student studying nonprofit law who is clerking with Carter Law Group, P.C. and Kimberly Witherspoon, an Arkansas nonprofit lawyer who is of counsel with Carter Law Group, P.C.