In the current economy, use of interns paid below minimum wage or nothing at all has increased noticeably.
Such a practice is permissible if the intern meets the U.S. Department of Labor’s (DOL) six-part test for “trainees”, but violates the minimum wage and overtime laws if those criteria are not met. DOL has signaled that detection of unlawful internship programs is an enforcement priority. Thus, companies that employ interns would be well-advised to review their internship programs in light of the DOL criteria for trainees:
1. The training, even though it includes actual operation of the facilities of the employer, is similar to that which would be given in a vocational school. The closer it is to a classroom or educational setting, the easier it will be to consider the individuals to be trainees. The arrangement might also result in a training certificate that could be listed as a job qualification on subsequent job applications. It would also help if the individual and the entity providing the training could first develop an individualized training plan that would be tailored to help the individual qualify for a specific job or range of jobs with a variety of companies via the training course.
2. The training is for the benefit of the trainees. This would be an easy argument to make in the case of individuals participating in welfare-to-work programs, but also in any training or internship programs that tend to increase their "hireability" in the open job market.
3. The trainees do not displace regular employees but work under close observation. This would also be an easy argument to make, especially in the case of a training “academy” run by a company, but also for a work experience program sponsored by a governmental entity. In the latter case, the government agency would be able to show that were it not for the work experience program, the activities in question would not be taking place. In a true training environment, the trainees are not going to be trusted to do much actual work for the company; the actual production would presumably be done by regular employees, who of course are already trained.
4. The employer that provides the training derives no immediate advantage from the activities o the trainees, and on occasion his operations may actually be impeded. This goes hand-in-hand with item # 3 above. It would be important here to document the training process and the before and after figures for comparison. Again, the actual productive work will be done by regular employees; any productive work done by trainees would have to be insubstantial in nature and amount and secondary to the training process.
5. The trainees are not necessarily entitled to a job at the completion of the training period. Again, this is related to #3 above. The work would not be done at all, or at least certainly not on the schedule that exists, were it not for the existence of the training school or program under which the individuals receive training. The courts find it important to have a written agreement to the effect that trainees have no expectation or guarantee of employment upon completion of the training.
6. The employer and the trainees understand that the trainees are not entitled to wages for the time spent in training. The courts find it important that there be a written agreement to the effect that payment for the services is neither intended nor expected. These criteria, plus additional information, appear in the book Especially for Texas Employers at http://www.twc.state.tx.us/news/ef/advanced_flsa_issues.html#interns_trainees.
Regarding an intern’s ability to file an unemployment or wage claim once the internship is over, since either type of claim would have to be based upon the claimant having “worked” for the employer, and criterion 4 above presumes that the intern was not actually working, it is doubtful that the intern could list the internship as the “last work” on an unemployment claim, or else file a wage claim.