Unpaid Internships: The Return

2014 saw an explosion in lawsuits surrounding the proper identification and payment of interns. In January 2014, Elite Model Management settled with former unpaid interns. Months later in October, NBC Universal closed a $6.4 million settlement with its unpaid interns. Then in November, Condé Nast settled with its former unpaid interns for $5.8 million. This lawsuit also resulted in Condé Nast terminating its unpaid internship program.

For some time, it was anticipated that the existence of unpaid internships would decline. Most of the lawsuits mentioned here revealed each employer’s inability to meet the U.S. Department of Labor’s (DOL) six factor test for unpaid internships.

On January 8, 2018, however, the DOL announced adjustments, thereby updating the guidelines for “The Test for Unpaid Interns and Students.” The updated fact sheet explains that “Courts have used the ‘primary beneficiary test’ to determine whether an intern or student is, in fact an employee under the FLSA (Fair Labor Standards Act). In short, this test allows courts to examine the ‘economic reality’ of the intern-employer relationship to determine which party is the ‘primary beneficiary’ of the relationship.” A concern for many courts with the original test was determining whether “the employer doesn’t gain an immediate advantage from the intern’s activities.”

What are the new seven factors for determining a lawful unpaid internship? Do these adjustments make it easier for organizations to provide meaningful unpaid internships?

The Seven New Factors

1. The extent to which the intern and the employer clearly understand that there is no expectation of compensation. Any promise of compensation, express or implied, suggests that the intern is an employee—and vice versa.
2. The extent to which the internship provides training that would be similar to that which would be given in an educational environment, including the clinical and other hands-on training provided by educational institutions.
3. The extent to which the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit.
4.  The extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic calendar.
5. The extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning.
6. The extent to which the intern’s work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern.
7. The extent to which the intern and the employer understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship.

With the inclusion of the possible academic credit / formal education tie in, the new test is more flexible than the previous one. Determination on whether an employee should be paid is now based on an overall view of the circumstances. This makes it possible for organizations to meet the standard. It is still suggested, however, that employers ensure the intent and design of their internship programs are primarily beneficial to the interns.

Reactions, of course, vary. For example, Eric Glatt was a plaintiff from a lawsuit involving his unpaid internship with Fox Searchlight. In a comment to Bloomberg Business online, Glatt mentioned that “I don’t like the legal implications of this new test…but the practical implications may make the kinds of internships I did [entry-level jobs disguised as educational opportunities] go away.” Some labor advocates worry that these new guidelines may permit an organization to justify any program as benefitting an intern. On the other hand, due to the wave of lawsuits in previous years the on-going trend has been for employers to be safe and pay minimum wage. We look forward to seeing how organizations and future interns utilize these new adjustments.

What about your organization? Have you hosted an unpaid internship program? Have such programs been discontinued in recent years? Share your thoughts in our comments section below!

Meeting the Demand for Talent in 2018

In 2016, “failure to attract and retain top talent” was the number one issue in the Conference Board’s 2016 survey of global CEOs. A recent McKinsey Global Institute Study suggests “that employers in Europe and North America will require 16 million to 18 million more college-educated workers in 2020 than are going to be available.” This means the hunt for acquiring and retaining talent will be heightened as time goes by.

In particular, the ever-growing technology industry has large demands for talent. A Gartner report entitled “Service Providers are Waging War against U.S. Talent Shortage with Unconventional Methods” says to expect 1.4 million computer specialist job openings by 2020. Projections show universities won’t produce enough graduates to fill 30% of these jobs. How can we meet the needs for talent in 2018 and beyond?

A Manufacturing Business Technology online article points to four economic trends that may impact this talent issue:

1. Global Growth – indication of steady growth.
2. Softening Dollar – U.S. exports are increasing as U.S. products become cheaper to foreign nations.
3. Increase in U.S. Spending – increase in spending and inventories after two years of flat sales.
4. Political Realities Settling – as we move into a new year and go into a second term with the current Presidency, the expected tax overhaul should fuel hiring in the near future.

With these factors stoking the war for talent, what are some proactive choices Human Resource departments can make or consider when attempting to attract and keep critical employees? Recruiting trends indicate that due to advancements in Virtual Private Network technology, or VPN, remote workforces are growing. This approach appeals to a workforce that values flexible work. Perhaps investigating how your organization can feature some form of flexible work scheduling could be helpful in retaining talent. In addition, gamification technology could be used not only to engage current employees, but also to screen candidates for openings. Investing in such technology will appeal to the tech-savvy generations in the workforce.

Investing in on-the job training programs also can be helpful. As Mike Starich explains in a manufacturing Business Technology online article,

During the Great Recession, companies had to dramatically cut training costs — if no one is hiring, there is no need for training. Today, the pressure to hire is on and companies that are proactive on improving their approach to hiring and training will be ahead of the market. Embrace on-the-job training and develop internal training and certification programs to build your pool of skilled talent. Typically, Hiring Managers are more open-minded on job descriptions than HR and TA [Talent Acquisition] presume because they know that they can train people with right basic profiles and positive attitudes.

An ADP-powered blog supports this thought by pointing out that the lack of advancement opportunities is the second most popular reason why employees leave an organization. To combat this, offering learning management systems, training opportunities, and / or certification programs can give employees avenues to learn more and further develop without leaving their current employers.

What tools does your organization use to attract talent? Has your organization made adjustments to HR programs in order to more successfully attract and retain talent? We encourage you to share your thoughts in the comment section below!