According to recent studies, at least 2.5 million students participate in internships each year, the vast majority of which are unpaid.  Unpaid internships have only grown in popularity and desirability due to the recession and the increasingly competitive labor market for college graduates.  The once unheard of practice of replacing full-time workers with unpaid interns has become the new status quo. 

Realizing the shift in employment trends, the United States Department of Labor (“DOL”) is stepping up nationwide enforcement efforts on employers that fail to properly pay interns.  These efforts include educating students and colleges about the Fair Labor Standards Act’s internship requirements.  The DOL utilizes a six-factor test for determining whether student workers are interns whose work can be uncompensated or employees entitled to compensation.  Two of the six factors pose significant challenge to employers -  the requirement that interns not displace regular workers and that employers derive no immediate benefit from the internship.  Not surprisingly, most internships do not meet this standard.

Industry experts have encouraged the DOL to adopt a cost-analysis to determine whether the per-hour benefit to the employer of the intern’s work outweighs the per-hour cost of the intern.  However, there are no signs that the DOL intends to back away from its more stringent test.  Nancy J. Leppink, acting Director of the DOL’s Wage and Hour Division, recently told the New York Times, “There aren’t going to be many circumstances where you [for-profit employers] can have an internship and not be paid and still be in compliance with the law.” 

 The increased attention from the DOL suggests that litigation over the unpaid internship issue may be on the horizon.  Employers with unpaid internship programs should contact their Kilpatrick Stockton attorney to review best practices and to ensure that the company is doing everything possible to comply with the FLSA’s internship requirements.