Square Pegs and Round Holes: Shrinking Protections for Unpaid Interns under the Fair Labor Standards Act
33 Pages Posted: 9 Aug 2019
Date Written: August 8, 2019
Since 2011, there have been close to one million unpaid interns among the university population during any given year. Although many if not most are working at for-profit companies, their right to compensation under the Fair Labor Standards Act has been denied or seriously questioned under standards set forth by the federal courts of appeals. And yet the FLSA offers the broadest definition of “employ” in all of federal law, along with detailed exemptions requiring a reduced but actual wage payment for “apprentices,” “learners,” and “students.” And Congress, when enacting the FLSA in 1938 and amending it in subsequent decades, has expressed a goal of preventing evasion of minimum wage requirements under the guise of such exemptions. How has the law been bent in such an unlikely direction? That is a principal question this paper sets out to answer.
Legal standards under the FLSA were until quite recently rather clear. They had been consistently articulated by the agency from 1938, as applied through a leading Supreme Court decision in 1947 and a series of Labor Department Interpretive Bulletins, Opinion Letters and related agency pronouncements over many decades, emanating from both Democratic and Republican administrations. Unpaid internships at for-profit employers were permissible only if part of a prescribed educational or training course that offered close employer supervision of the educational experience with no displacement of regular employees and no immediate employer advantage derived from intern performance.
But this long-standing approach, emphasizing detailed requirements that employers must meet, has been superseded by an ad hoc balancing test adopted by numerous courts of appeals in the past decade. The prevalence of the new “primary beneficiary” standard has allowed for-profit employers to establish and maintain unpaid internships with few restrictions.
The paper contends that the new balancing test is in tension with the text, legislative history, and longstanding agency application of the Act. The bright line approach, developed over decades to protect basic minimum rights to compensation for work performed, has been replaced by a balancing test permitting far more judicial discretion. As a result, unpaid internships have become relatively easy to justify under the FLSA.
Unpaid internships are also contestable as a matter of policy. The asserted benefits derived from internships include resume enhancement, networking opportunities, and training received. But available data indicates that these benefits are realized to a considerably greater degree by paid rather than unpaid interns. And whatever benefits do accrue for unpaid interns are offset if not outweighed by various social and individual costs: lack of protection under antidiscrimination laws for unpaid intern “non-employees”; the socioeconomic impact on student populations when access to unpaid internships is a function of family wealth; and employers’ ability to substitute unpaid interns for regular employees receiving decent wages. Still, whatever the policy ramifications, the FLSA was enacted to prevent any such policy justification from undermining basic worker protections.
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