Going to School on Unpaid Internships Minimum Wage Lessons for Employers

Ahhhh… summer. Backyard cook-outs. Days at the pool. And the venerable June-August tradition of giving college students a taste of real work experience without denting your payroll. But wait — various media outlets are reporting that the days of the “unpaid internship” are over.1 Are they? It may be soon to tell. But what can this issue teach us about the nearly 80-year-old federal law governing compensation of virtually all employees in the United States, the Fair Labor Standards Act (FLSA2)? The FLSA was enacted in 1938 as part of the package of Depression-era laws designed to protect workers from oppressive employment conditions. It established a minimum national wage, restricted child labor, and required overtime pay for work in excess of 40 hours in a single workweek3. The general rule of the FLSA is that an employee must be compensated for all time worked. There are, however, numerous exceptions to this rule. For example, employees who are paid on a salary basis of at least $455/week and have managerial, professional or other responsibilities requiring “judgment and discretion with respect to matters of significance” may be exempt from overtime. Employees in certain industries may also be exempt from overtime.4 Interstate commercial truck drivers, for example, are exempt from overtime and are instead subject to hours-of-service regulations enforced by the U.S. Department of Transportation. Back to internships. In fact, the term “intern” is not mentioned in the statute. So, applying the general rule, if an intern is an “employee,” then he or she must be paid the federal minimum wage of $7.25/hour.5 But remember, there are numerous exemptions to the FLSA, established by both Congress and the courts. In 1947, the U.S. Supreme Court held that “trainees” of a railroad employer were not “employees” under the FLSA6. Central to the Court’s decision was that the “trainees” 1) received “practical training” from the railroad; 2) did not displace regular workers for the railroad; and 3) provided no immediate advantage to the railroad’s business; and, in fact, at times “impeded” it. So if an intern qualifies as a “trainee,” then he or she is exempt from the minimum wage requirement of the FLSA. Under guidelines established by the U.S. Department of Labor (“DOL”),7 the employer must demonstrate8 that it meets all six of the following criteria to qualify for this exemption:

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Whistleblowers: Call 1-800-OSHA Obama Administration expands efforts to protect employees from retaliation

For most employers, “OSHA” is (quite literally) a four-letter word. It stands for the Occupational Safety and Health Administration, an agency within the U.S. Department of Labor established by the Occupational Safety and Health Act of 1970 (OSH Act).1 Most employers are familiar with OSHA’s role in enforcing workplace safety and health regulations, but it has other roles as well: 1) it has the authority to develop new regulations to address health or safety hazards in the workplace; 2) it conducts training and offers voluntary compliance programs for employers; and 3) it enforces the so-called “whistleblower” provisions of over 20 federal laws – many having nothing to do with workplace safety or health.

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Religion, Corporations, and the First Amendment

Does a for-profit corporation have a right to the “free exercise” of religion guaranteed under the First Amendment? On March 25, 2014, the United States Supreme Court will hear arguments in a case that has local interest because one of the parties, Conestoga Wood Specialties Corporation, is headquartered in Lancaster County. The case also has national interest because of its roots in the controversial “contraceptive mandate” required by the Patient Protection and Affordable Care Act – AKA “Obamacare” – a federal law that survived constitutional challenge in 2012.   Resolving the case will require the Supreme Court to consider two branches of constitutional law: one involving the right to “free exercise” of religion in the context of commercial activity; and the other involving the scope of First Amendment protections for corporations.  The Supreme Court’s earlier cases on these issues form part of the “legal family tree” of Conestoga Wood, a case that, at its core, questions whether corporations can be exempted from government regulation under the “free exercise” clause of the First Amendment.

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Wages & Overtime

Both state and federal laws apply to the compensation of employees in Pennsylvania. The current minimum wage is $7.25/hour, and most hourly workers are entitled to overtime compensation after working 40 hours in a workweek. Even some salaried workers (those paid on an annual, rather than hourly basis) may be eligible for overtime under strict federal regulations that limit the overtime exemption to workers who have specific job duties. For example, to be exempt from overtime, an employee must: (1) supervise two or more employees (known as the “executive” exemption); (2) hold a professional degree required for the job (“professional” exemption); or (3) use “discretion and independent judgment with respect to matters of significance.” Other exemptions may apply depending on the employee’s duties and the employer’s industry. (Interstate truck drivers, for example, are exempt from overtime requirements; their hours are separately regulated by the U.S. Department of Transportation.) In addition, employers must ensure that employees performing the same or similar jobs are paid equally, regardless of gender, race, religion, age, national origin, disability, or other protected category. (See “Employment Discrimination.”)

Baulig Law can assist employers in ensuring that their employees are properly compensated and classified under state and federal wage and overtime laws. Failure to properly classify workers as exempt or non-exempt for overtime can lead to civil penalties as well as private lawsuits. In fact, there has been an increase in the number of “class action” wage and overtime lawsuits brought against employers in recent years. The availability of significant attorneys’ fees in these cases makes it likely that this trend will continue. So it makes good business sense to ensure your employees are properly paid and classified.