Twas the week before Christmas when at the North Pole,

Santa checked his throughput and moaned, “We’re in a hole!”

“We’ll never get done, we’re far from ready, let’s get some interns – some students will do.

Surely they’ll want to learn what elves can do!”

“On Juniors and Seniors, Thetas, Lambda Chi’s, you’ll learn a lot – just kiss your evenings and weekends Good-Bye!”

So, Santa called Magical Elves, Inc. to find college students who would accept his unpaid internships. Is that a problem?

Actually, internships may be a good option for Santa’s non-profit operation – so long as he does not pay a stipend or offer any benefits and clarifies whether interns are unpaid volunteers or paid employees. Paying a “stipend” could cause unintended negative consequences that might cause the Department of Labor to classify Santa’s interns as employees. If employees, Santa would owe back wages (at least minimum wage) and back taxes. On the other hand, if Santa follows the wage regulations closely his interns may be treated as “trainees.” If “trainees,” nonprofit may be relieved from paying minimum wages, yet need carefully to document how the internship primarily benefits the intern — not the nonprofit. And, also, workplace injuries could be a problem.

Internships in the “for-profit” private sector will most often be viewed as employment and violating the law if not paying minimum wages because often the manner and means by which the intern’s work is accomplished is controlled by the hiring party If interns qualify as employees rather than trainees they typically must be paid at least the minimum wage and overtime compensation for hours worked over forty in a workweek. The Fair Labor Standards Act (FLSA) defines “employ” very broadly to include “suffer or permit to work” and  must be compensated under the law for the services they perform for an employer.  

The Test For Unpaid Interns. To confirm FLSA determination of internship and to avoid employment obligations, the following six criteria must be applied:

 The internship, even though it includes actual operation of the facilities of the employer, is similar to training which would be given in an educational environment;

  1. The internship experience is for the benefit of the intern;
  2. The intern does not displace regular employees, but works under close supervision of existing staff;
  3. The employer that provides the training derives no immediate advantage from the activities of the intern; and on occasion its operations may actually be impeded;
  4. The intern is not necessarily entitled to a job at the conclusion of the internship; and
  5. The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

 Assuming these are met, no employment relationship exists, and the FLSA’s minimum wage and overtime provisions do not apply. This employment exclusion is necessarily quite narrow because the FLSA’s definition of “employ” is very broad.

Other States. Some state statutes, like New York’s Minimum Wage Act and Wage Orders impose rules and guidelines in addition to the FSLA. California and Oregon recently extended application of sexual harassment and discrimination laws to interns.  By the way, none of these laws are apply to governmental employees.

Tilting the Scales in Your Favor.

The more your internship program is structured around a classroom or academic experience as opposed to your actual operations, the more likely the internship will be viewed as an extension of the student’s educational experience (this often occurs where a college or university exercises oversight over the internship program and provides educational credit).  The more the individual receives skills viable in multiple employment settings, as opposed to skills particular to your particular operation, the more likely your intern would be viewed as receiving training.  Ideally, your intern does not perform routine business work on a regular and recurring basis, and the business is not dependent upon the work of the intern.  On the other hand, if your interns are engaged in your operations or perform productive work (for example, filing, performing other clerical work, or assisting customers), then incidentally receiving new skills or improved work habits will not exclude application of the FLSA’s minimum wage and overtime requirements. 

Wanting to comply with the latest edict of the Equal Employment Opportunity Commission and give a recently released felon a break, Awft N. Cawssius ignored Pa Roll’s answer of “yes” to whether he had been convicted of a crime in the last five years and hired Pa to work as an armed security guard at Awft’s convenience store. When Pa Roll assaulted and shot a suspiciously acting John Q. Shopper, Shopper sued, alleging that Cawssius knew or in the exercise of reasonable care should have known that Pa Roll was unfit to be a security guard and created an unreasonable risk of danger to the other convenience store patrons. Is Cawssius liable to Shopper? Does the EEOC edict minimize his liability?

EEOC Guidance / Negligent Hiring

The EEOC’s updated Enforcement Guidance on the “Consideration of Arrest and Conviction Records in Employment DecisionsUnder Title VII of the Civil Rights Act of 1964” directs that an employer that uses criminal history to make employment decisions may violate the prohibition against employment discrimination under Title VII of the Civil Rights Act of 1964. The April 2012 Guidance summarizes the EEOC’s long-held position that employers’ reliance on arrest and conviction records may have a disparate impact on individuals because of their race or national origin and mandates significant changes in certain areas that are important to most employers. However, for employers, enforcement of the April 2012 Guidance may increase employer tort claim risk.

This month the State of Texas sued the EEOC in federal court in Lubbock seeking relief from the 2012 arrest and conviction guidance and complaining that the EEOC did not have the authority to implement hiring guidelines that prohibit Texas and its agencies from categorically excluding convicted felons for certain jobs. Texas state law allows for blanket, no-felons policies at certain state agencies, including the Department of Public Safety, the Department of Aging and Disability Services, the General Land Office, the Juvenile Justice Department, the Lottery Commission, the Parks and Wildlife Department and the public school system.

Yes, Awft N. Cawssius is probably liable either way – for negligent hiring of Pa Roll, or for violating the EEOC had he not hired Pa Roll. No, for those employers in Texas and most states who hire a convicted felon, the EEOC edict does not reduce liability. Three states (Colorado, Massachusetts, and North Carolina) adopted laws, in conjunction with other reforms, to limit the liability of employers who hire people with criminal records.

Tilting the Scales in Your Favor 

How Can Employers Legally Conduct Criminal-Background Checks? Several tips to assist employers from the Texas Workforce Commission:

  • Audit. Routinely audit applicant/hire files to determine whether your criminal-background-check policy disparately impacts any group.
  • Criminal Background / Credit. Review current criminal-background-check policies for consistency with the “business necessity” requirement and the EEOC position. Employers may perform criminal background checks themselves, but must give written notice that a credit or background check will be done and get written authorization for the check per the Fair Credit Reporting Act. If turned down, the employer must tell the applicant why, give the applicant a copy of the report, and let them know the name and address of the service that furnished the information.
  • Customer’s Homes. Texas requires in-home service and residential delivery companies to perform a complete criminal history background check on employees sent into customers’ homes (including attached garages or construction areas next to homes). Doing so gives Awft N. Cawssius the upper hand to argue that he did not act negligently in hiring. See the Texas Civil Practice and Remedies Code, Sections 145.002-145.004.
  • Convictions, Not Arrests. Unless required by law, Awft should ask only about  convictions and pleas of guilty or no contest, not arrests, and be prepared to show how the criminal record was relevant to the job in question, i.e., the security guard will be carrying a gun, or otherwise created an unreasonable risk of possible harm to people or property. More EEOC information HERE.
  • Polygraph. Never ask an applicant to take a polygraph exam, unless your organization is statutorily required to do so – that would be a violation of the Employee Polygraph Protection Act of 1988, a federal law.