Category: Employment Law

Unpaid Intern FLSA

When Are Unpaid Interns Employees Under the FLSA?

In 2010 the United States Department of Labor (DOL) issued guidance severely limiting for-profit companies’ ability to have unpaid interns. However, courts routinely rejected that rigid 6-part test.

On January 5, 2018, the DOL modified its approach, adopting the “primary beneficiary” standard favored by the courts.

Which test applies and the resulting analysis determines whether a company violates the Fair Labor Standards Act (FLSA) by not paying interns minimum wage and overtime.

Unpaid Interns – 2010 DOL Test

Since 2010, the DOL had taken the position that a for-profit business must pay its interns unless all of the following 6 criteria apply:

  1. The internship is similar to training received in an educational environment.
  2. The experience is for the benefit of the intern.
  3. The intern is not a substitute for regular employees and works under close supervision of existing staff.
  4. The employer derives no immediate advantage from the intern’s activities.
  5. The intern isn’t guaranteed a job at the conclusion of the internship.
  6. Both the employer and the intern understand that the intern is not entitled to pay for the time spent in the internship.

“Primary Beneficiary” Test

In 2015, the United States Court of Appeals for the Second Circuit rejected the DOL’s 2010 test. Instead, it analyzed the “economic reality” of the intern-employer relationship to determine which party is the “primary beneficiary” of the relationship.

Now, the DOL formally adopts the Second Circuit’s 7-factor analysis in a new Wage and Hour Division Fact Sheet. The seven factors are

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.

The DOL emphasizes that “Courts have described the “primary beneficiary test” as a flexible test, and no single factor is determinative. Accordingly, whether an intern or student is an employee under the FLSA necessarily depends on the unique circumstances of each case.”

Unpaid Interns Under Other Laws

The U.S. DOL’s position relates to whether an intern qualifies as an “employee” under the FLSA. It does not necessarily decide the question under other laws, including state minimum wage and overtime laws.

For example, the New York Department of Labor has adopted the 6 factors previously used by the U.S. DOL and adds these 5 additional factors of its own:

  • Any clinical training is performed under the supervision and direction of people who are knowledgeable and experienced in the activity.
  • The trainees or students do not receive employee benefits.
  • The training is general, and qualifies trainees or students to work in any similar business. It is not designed specifically for a job with the employer that offers the program.
  • The screening process for the internship program is not the same as for employment, and does not appear to be for that purpose. The screening only uses criteria relevant for admission to an independent educational program.
  • Advertisements, postings, or solicitations for the program clearly discuss education or training, rather than employment, although employers may indicate that qualified graduates may be considered for employment.

What Should Your Company Do About Unpaid Interns?

First, remember that the above pertains to for-profit companies. Non-profits and governmental organization have more leeway. But if you are a for-profit company, you still shouldn’t rely solely on this information in deciding whether you can use unpaid interns.

Since the DOL’s new position follows several appellate courts, it seems to be reasonably safe guidance regarding minimum wage and overtime under the FLSA. But even at the federal level, other laws could still apply to unpaid employees. For example, anti-discrimination laws may still apply, including those requiring reasonable accommodations based on disability or religion. And, in some cases, a union that represents your employees might claim to represent individuals you classify as employees.

Plus, at the state level, there is not only the minimum wage/overtime issue. You must also consider the impact of employee benefit programs, including unemployment, workers’ compensation and other state-mandated coverages.

Overall, for-profit employees should start by assuming that anyone working for them is an employee. They should only treat workers differently if there is a clear exclusion, e.g., valid intern or independent contractor. An experienced labor and employment attorney can assist in making that determination.

Cuomo Proposal on Workplace Sexual Harassment

First Look: Governor Cuomo’s Proposal to Combat Workplace Sexual Harassment

On January 2, 2018, New York Governor Andrew Cuomo announced his plan to “Combat Sexual Harassment in the Workplace”. Cuomo’s agenda includes a multi-faceted approach that would affect both governmental and private employers. It includes at least five measures to address workplace sexual harassment in New York.

Introducing these initiatives, Governor Cuomo stated:

“2017 brought a long overdue reckoning where the secret and pervasive poison of workplace sexual harassment was exposed by brave women and men who said this ends now. Our challenge in government is to turn society’s revulsion into reform, and we in New York must seize the moment and lead the way. There must be zero tolerance for sexual harassment in any workplace, and we can and will end the secrecy and coercive practices that have enabled harassment for far too long.”

Though there are already pending bills that pursue similar objectives, the Governor has only laid out his specific agenda relatively generically. So let’s just take a preliminary look at how he seeks to change New York employment law.

Note: In this post I raise questions and suggest some downsides to these proposals. That certainly does not mean that I’m opposed to combating workplace sexual harassment. The employers I work with would welcome more effective means of preventing sexual harassment. But this is a very difficult area to legislate, with the potential for many undesirable consequences. So, I think it’s valuable to give them some thought and critical analysis.

Prevents Use of Taxpayer Dollars to Fund Individual Sexual Harassment Settlements

It’s not yet clear how far this proposal intends to go. Would it be limited to harassment claims against elected State officials? Or would it extend to all claims based on the actions of governmental employees at every level of government in New York?

The latter approach could be particularly game-changing. Employees claiming employment discrimination in the form of sexual harassment usually name their employer directly. In fact, under Title VII (the federal law that prohibits workplace sexual harassment), individual employees can’t be held liable. Even though the New York Human Rights Law permits individual liability in some situations, employees almost always include the employing entity itself in lawsuits.

What happens if an individual doesn’t have enough money to settle a sexual harassment claim? Does the governmental employer still have to defend the claim, perhaps without the ability to settle? Can a governmental entity still be liable and responsible for paying damages to an aggrieved employee?

There are many complicated aspects to what seems like a straightforward policy matter. Is it feasible to implement this approach? We’ll see.

Proposes Uniform Code of Sexual Harassment for All Branches of State and Local Government

Presumably, this would essentially write a new sexual harassment policy, with consistent complaint procedures, for all governmental employers in New York.

Notably, this proposal includes an “anonymous whistleblower process to help individuals communicate complaints across state and local government without fear of retribution or consequence.”

One can reasonably question how effectively employers can respond to anonymous sexual harassment reports. Even assuming the report names the alleged perpetrator, a good investigation usually begins with speaking with the victim of harassment. If the employer doesn’t know who that is, then they may have little to go on other than asking the named employee whether they have sexually harassed anyone. That may not yield tremendous results.

Hopefully any such initiative would recognize the value of victim involvement in the investigation of sexual harassment. Emphasizing existing anti-retaliation laws, for example, should be a valuable component.

Prohibits Confidentiality Agreements Relating to Sexual Assault or Harassment for All Branches of Government — State and Local — Unless Express Preference of the Victim

This addresses the concern that employees often agree not to discuss their claims in exchange for a financial settlement. Reasonably, the risk is that the perpetrator may commit further harassment because the previous victim could not warn everyone else.

From my experience, in most employment discrimination cases the employer is less concerned about the employee telling others what actually happened to them. They are more concerned about the employee telling others that they received money to go away. This is a valid fear where the employer credibly doesn’t think it did anything wrong, but doesn’t want to spend years litigating the employee’s claim. . . . And also doesn’t want every other unhappy employee, or more often former employee, to come seeking the same payout.

So, one potential downside to this rule would be a greater reluctance to settle cases. Without the confidentiality agreement, the defendants may perceive even greater value in litigating cases out to a decision by judge or jury. If everyone will know about the allegations (and assuming the defendant reasonably believes they did nothing wrong), then the defendant may be better off proving their innocence.

The proposal does purport to permit confidentiality agreements upon the “express preference of the victim”. One might question how to make that a workable standard. What’s the difference between an employee agreeing to confidentiality (as they must usually do now) and demonstrating an “express preference” for it? Will this just mean that the defendant can agree to observe confidentiality, but not the complaining employee?

Mandates Private Companies That Do Business with the State Report Sexual Assault and Harassment Statistics to Prevent Secrecy

We don’t yet know the scope of which companies would be covered or what exactly they must report.

Happily, the majority of companies that do business with the State probably won’t have any incidents to report. But some will. How many will depend on how those terms are defined, etc.

How will the State use this data? Will it cancel the contracts? Pursue litigation? Issue press releases?

Again, the details will matter.

Voids Forced Arbitration Policies or Clauses in Employee Contracts that Prevent Sexual Harassment Cases from Consideration in Law Enforcement Investigation and Trials

Frankly, it’s already unlikely that any arbitration policy or clause in employee contracts would prevent “law enforcement investigation” of sexual harassment cases . . . . Even to the extent that includes investigation by the New York State Division of Human Rights or the federal Equal Employment Opportunity Commission. The National Employment Law Project, a prominent employee-rights group, through its Senior Counsel Patricia Smith (former New York Commissioner of Labor under Governors Eliot Spitzer and David Paterson and U.S. Solicitor of Labor under President Obama), has also acknowledged this, along with expressing some doubts about other aspects of the proposal.

Thus, the primary effect of this piece of the legislation (if enforceable despite potential federal preemption arguments) would be to preserve employees’ default rights to go to court with a claim of workplace sexual harassment. It at least seems fairly straightforward, with few unintended consequences to victims of sexual harassment. Most likely, employees could still readily agree to arbitrate sexual harassment cases if they want to and employers are interested.

What New York Employers Should Already Be Doing to Combat Workplace Sexual Harassment

Again, my scrutiny of the Governor’s announced agenda only means to acknowledge the difficulty of addressing this serious issue. With or without new State legislation, all New York employers should be proactive in avoiding sexual harassment.

Keep in mind: the New York State Human Rights Law prohibits workplace sexual harassment for all New York employees. Other aspects of the State employment discrimination law only apply to employers with at least 4 employees. But the sexual harassment provisions apply to every employer.

For now, here are some basic elements every employer should implement to combat workplace sexual harassment:

 

I will continue to monitor these proposals and the related legislation. To make sure you don’t miss any important updates, sign up for my email newsletter!

New York Employment Law by the Numbers

New York Employment Law by the Numbers

In an earlier post I listed some of the most important numbers pertaining to federal (U.S.) labor and employment laws. This time we’ll look at the numbers that stand out specifically for New York employment law compliance.

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1 – Employee threshold for many employment laws

As with federal laws, many aspects of New York employment law apply to employers with as few as one employee. This includes State minimum wage/overtime, wage payment, worker’s compensation, disability benefits, paid family leave, and sexual harassment laws.

4 – New York Human Rights Law prohibits discrimination

New York employees of employers with at least 4 employees are protected by New York’s employment discrimination laws. This is a much lower coverage threshold than similar federal laws. They typically don’t apply until an employer has at least 15 or more employees. The New York Human Rights Law prohibits discrimination on the basis of age, sex, sexual orientation, religion, race, national origin, disability, and predisposing genetic characteristics. It also protects employees from discrimination based on familial status, marital status, military status, and domestic violence victim status.

Note: The New York Human Rights Law prohibits all employers, with a few as one employee, from engaging in sexual harassment.

6 – Statute of limitations for wage claims, in years

New York employees can file claims for unpaid or underpaid wages going back as far as six years. This is much longer than the 2- (sometimes 3-) year statute of limitations under the federal Fair Labor Standards Act.

8* – Annual New York Paid Family Leave allowance, in weeks

In 2018, eligible employees may take up to 8 weeks of leave under the New York Paid Family Leave Program. In 2019 the maximum leave period increases to 10 weeks. It increases again in 2021, to 12 weeks.

$10.40 – Minimum wage for Upstate employees

New York’s minimum wage requirements depend on geographic location and employer size. On December 31, 2017, the base minimum wage for all employees outside of New York City and Nassau, Suffolk, and Westchester Counties increased to $10.40 per hour.

Click here for more details, with charts, about current and future minimum wages throughout New York State.

18 – Age at which New York Human Rights Law begins to prohibit age discrimination

Unlike the federal Age Discrimination in Employment Act (ADEA), New York’s employment discrimination law prohibits age discrimination against employees in both directions. The ADEA only protects employees 40 years old or older from suffering adverse employment actions because they are too old. However, the New York Human Rights Law allows employees 18 or older to claim discrimination either because they are too old or too young.

20 – Weekly hours parameter for New York Paid Family Leave

An employee’s eligibility for New York Paid Family Leave depends on how many hours they are regularly schedule to work in a week. Employees regularly scheduled to work at least 20 hours per week become eligible once they have worked for their employer for 26 consecutive weeks. Employees regularly scheduled to work less than 20 hours per week become eligible once they have worked on 175 days for the employer.

25 – New York WARN notice triggering events

The New York State Workforce Adjustment Retraining Notification Act (WARN) requires employers to give written notice before mass layoffs, plant closings, and relocations that will cause employment loss for at least 25 employees, sometimes more.

30 – Minimum length of meal period for most employees, in minutes

New York labor law requires that all employees who work at least 6 hours in a shift (sometimes less) be off duty for a meal period of at least 30 minutes. Additional time may be required in some cases.

For more details, see Got Lunch? A Primer on the New York Meal Period Requirements.

50 – New York WARN covered employer

Non-governmental employers with 50 or more employees within New York State are potentially subject to New York WARN notice obligations.

90 – Days in advance New York WARN notices must be issued

This is longer than the federal WARN Act’s 60-day notice period. The employer must notify affected employees (and their unions, if applicable) and certain government officials. There are exceptions to the notice obligation. If circumstances require the employer to act suddenly, the employer usually must give as much notice as possible.

$780 – Required weekly salary for some New York overtime exemptions (Upstate)

New York’s administrative and professional exemptions from the State’s minimum wage and overtime rules require that employees receive a minimum weekly salary. As with the minimum wage, the salary requirement depends on location within the State and size of the employer. As of December 31, 2017, the minimum salary for these exemption (outside of NYC, Nassau, Suffolk, and Westchester) is $780 per week.

Click here for more details, with charts, about current and future salary requirements throughout New York State.

New York Employment Law Is Complex

These numbers only help demonstrate some of the compliance obstacles New York employers face. And, unfortunately, New York employment law changes frequently. Plus, many New York employers must also satisfy a maze of federal employment laws at the same time.

One great way to keep on best practices and developments regarding New York employment law is through my monthly newsletter. It’s easy to sign up for it here!