From: www.twc.state.tx.us (Texas Workforce Commission)

Student Interns - Trainees Top of Page

There is no FLSA exception as such for "student intern". The term "intern" appears only once in the FLSA itself, in section 203(e)(2)(A), which exempts Congressional interns from the definition of "employee"; and only once in the regulations, in 29 C.F.R. 541.304(c), where it is explained that medical interns do not have to be paid on any particular basis, just like the situation is with doctors, attorneys, and teachers, as long as they have graduated with a medical degree necessary to practice medicine, i.e., they are no longer "students", except perhaps in a post-graduate program.

To have a better understanding of how student interns are treated under the FLSA, one has to realize that such workers are in essence "trainees". The DOL has a fairly extensive set of rulings and other guidance on "trainees", as explained in the paragraphs below.

Certain types of trainees are completely excluded from FLSA coverage. However, the requirements for such total exclusion are quite stringent. In an administrative letter ruling dated February 22, 1974 (WH-254, BNA WHM 99:1152), the DOL stated that if a person is considered a "trainee", that person is not considered an "employee" and does not have to be paid minimum wage and overtime. The letter gave the following six criteria for the designation of a person as a trainee; commentary on each criterion follows in italics:

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 of 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.

The ruling went on to note that since the trainees' work products were sold by the employer, a vocational-technical school, and thus benefited the institution, and since the work done by the trainees limited the employment opportunities of regular employees who would otherwise be producing those goods, the students were not "trainees" and were thus covered by the FLSA.

These six criteria also appear in the DOL's Field Operations Handbook in section 10b11, and are mentioned in other letter rulings from DOL, two of which are excerpted below, one dealing with security guard trainees and the other dealing with training programs that last 18 months and work performed by mental hospital patients. Government-sponsored employment development programs are addressed in Field Operations Handbook section 10b11a. DOL issued Fact Sheet #71 dealing with this issue in April, 2010 – it may be downloaded at http://www.dol.gov/whd/regs/compliance/whdfs71.htm.

With the above criteria in mind, it would probably be important, in any publicity or discussions about the training school, to describe it as a type of school or "academy" that is meant to prepare individuals for entrance into an industry, i.e., any company in an industry, rather than as an orientation period for becoming an employee of a specific company. If the training is part of a government program, it would be important to bill it first and foremost as a benefit to hard-to-place or first-time workers and as a way to help them bridge the gap between government assistance and work, rather than as a way to get public works done that may have been on the back burner for a time due to lack of funding or other resources. Put another way, any productive work done by the individuals is more like a serendipitous by-product of training programs for difficult-to-place individuals, than a primary goal of the program.

The court decisions regarding this issue always use one or more of the above criteria to justify a ruling that certain individuals are not employees for purposes of the FLSA. One court decision found that the persons were trainees during the first part of a training program, but not during the second half, since the first part stressed classroom-type learning under close supervision, but the second half dispensed with the focus on classroom activities and close supervision and stressed activities that were basically indistinguishable from those of regular employees.

A landmark case in this area is that of Donovan v. American Airlines, Inc., 686 F.2d 267, 25 WH Cases 901 (5th Cir. 1982). The case involved a well-known training academy run by American Airlines for flight attendants and other airline personnel; the students received no pay for the training they received both in the classroom and in airplanes. Further, any work they did was secondary to the training program. Importantly, the airline was not obligated to hire the graduates of the program, and other airlines generally considered the training to be a good qualification for hire.

A Fifth Circuit case, Atkins v. General Motors, Inc., 701 F.2d 1124 (5th Cir. 1983), ruled that people who participated in a state-sponsored training program that included hands-on experience and was designed to provide the company with a trained pool of workers were not employees, but rather trainees.

The courts seem to find that the most important determinant is the question of who primarily benefits from the arrangement. If the employer is the primary beneficiary, the individuals will be considered employees, but if the individuals are the ones who primarily benefit from the work experience, they will be considered trainees.

Some illustrative letter rulings in the area of trainees include:

Admin. Op. WH-162, May 3, 1972 (BNA, WHM 99:1087):

This is in reply to your letter of March 31, 1972, concerning compensable work time of security guard trainees who will receive 40 hours of training required by a services contract before they are allowed to perform work pursuant to the contract...

...Whether time spent in training is compensable is discussed on pages 7 through 9 of the enclosed pamphlet, Hours Worked. Under the six criteria given on page 9 for determining the employment relationship of trainees, we would view the security guard trainees as employees. The training is oriented in terms of "company practices, policies, and rules", and is required under the terms of the contract before any employees are permitted to perform work pursuant to the contract. This indicates that the employer derives an immediate advantage from the training. The training is given to persons who will work on the contract, and the employer can fulfill the contract only by employing such specifically trained employees.

Additionally, the training time is not excluded from consideration as hours worked under any of the standards discussed on pages 7 and 8. Therefore, ...the employee should be paid for all time spent in learning his job. Hours worked generally includes the time spent in initial indoctrination and training as well as time devoted to subsequent training...It is not lawful to compensate only those who complete the training and are "hired"...

Admin. Op. WH-229, June 29, 1973 (BNA, WHM 99:1131):

1. If all six of the criteria listed on page 3 of the pamphlet, Employment Relationship, are met, the trainees are not employees within the meaning of the Fair Labor Standards Act. The monetary requirements of the Act do not apply where there is no employment relationship.

These tests were derived from two cases adjudicated by the Supreme Court in 1947. These cases involved voluntary participation in training programs. See Walling v. Portland Terminal Co., 330 U.S. 148 [6 WH Cases 611], and Walling v. Nashville, Chattanooga and St. Louis Railway, 330 U.S. 158 [6 WH Cases 615].

2. The phrase you quote concerning persons who "may work for their own advantage on the premises of another" was taken from the Portland Terminal case and must be read in context with the other criteria. There is no single rule or test for determining whether an individual is an employee under the Act. The purpose and the manner in which an individual enters a training program are among the factors to be considered in determining whether there is an employment relationship. Whether participation is voluntary is considered in context with the other enumerated criteria. If the work-training activity is voluntary and all six criteria given are met, the trainee would not be considered an employee under the Act. We would need more information to assess the situation given in part (b) of your question concerning a mentally retarded individual whose participation in a training program may not be "voluntary".

3. We would need more information to respond fully to this question. In general, a program of 18 months of work-training in which the trainee does productive work would not appear to fit under the six criteria. The cases cited above, from which the criteria were taken, involved training programs of seven or eight days' duration. Additionally, other criteria may be used in situations that are different from those in the Portland Terminal case. For example, we have departed from that case with respect to tasks performed by patients in mental hospitals who are required to remain under treatment for extended periods when the tasks they perform have been determined, as a matter of medical judgment, to have therapeutic or rehabilitative value in the treatment of such patients.

4. Work done in activities centers by resident patients of mental institutions has always been considered as being performed pursuant to an employment relationship between the patient and the institution. Whether the product worked on or produced by the employee is destined for purchase by a profit-making or a charitable organization would have no effect on the determination of employment relationship as such.

Liability Under the Fair Labor Standards Act Top of Page

Any employee or former employee may file a complaint with the DOL's Wage and Hour Division that an employer failed to meet its obligations under the FLSA. The DOL has the authority to investigate and make a ruling, and if it determines that the employer owes the employee back wages, it may enforce the ruling by a variety of methods:

·  conciliation - if the DOL can persuade an employer to cooperate, it may supervise a settlement of the claim between the employee and employer, in which case the employer may be able to escape with only liability for back pay (Section 216(c);

·  civil action for back pay and damages - the DOL may sue on an employee's behalf to recover back wages and liquidated damages (Section 216(c);

·  injunction - the DOL may apply for an injunction to restrain further violations by the employer or to restrain the sale or transfer of goods produced with labor that was compensated in a way that violated the FLSA (Section 217);

·  criminal action - under 29 U.S.C. 216(a), the U.S. Department of Justice may bring a criminal action against an employer in the case of a willful violation of the FLSA; and

·  civil actions by employees - employees have the right to file suit in a court of competent jurisdiction to protect their rights under the FLSA (29 U.S.C. 216(c)).