The ABCs of California Internship Laws
California internship laws are principally governed by the California Wage Orders ("Wage Orders") and the California Labor Code ("Labor Code"). Unless exempt from the California statutes and Wage Orders, all persons employed in the state of California "are entitled to receive from their employer payment of [days worked] wages…. and statutory minimum wages for all hours worked under the conditions set forth …." Wage Order No. 4-2001 §1. Employers provide training, education, or work experience with an expectation that the trainee or intern will assist the employer in return for academic credit earned through a school or academic institution.
The Wage Orders and Labor Code establish five fundamental elements that distinguish a trainee from an employee:
- The training, instruction, or education is for the benefit of the trainee;
- The trainee or intern does not displace regular employees within the operations of the business;
- The trainee or intern does not receive or expect any compensation from the employer;
- The employer that provides the training derives no immediate advantage from the activities of the trainee or intern; and
- The trainee or intern understands that he or she will not be entitled to a job at the conclusion of the training or internship.
The Division of Labor Standards Enforcement of the California Department of Industrial Relations also provides guidance to employers as to whether a lawfully unpaid internship is appropriate in the California Wage Order 16 . The DLSE Order suggests that individuals are deemed employees and are thus entitled to compensation under Wage Order unless they qualify as unpaid interns. Specifically, the DLSE Order provides a six-factor test that should be met for an individual to qualify as an unpaid intern and therefore be exempt from Wage Order.
- The training, instruction, or education provides benefits to the intern;
- The intern is not displacing regular employees of the employer;
- The intern does not immediately benefit from the work performed;
- The intern understands that the program is not a guarantee of employment;
- The employer realizes no immediate economic benefits from the activity of the intern; and
- If in an educational environment, these factors must also apply: (a) the employer /potential employer is affiliated with the school, and (b) the school provides the intern with academic credit.
Besides these six factors, the DLSE Order also cautions employers to keep in mind additional factors that have been used to discern whether an individual is an unpaid intern, including but not limited to:
Above all, California employers should recognize the fact that an employer cannot arbitrarily decide what training, instruction, or education is beneficial to its business. Employers should give careful consideration to the skills and knowledge a particular internship will teach an intern. If an internship fails to pass these tests, employers subject themselves to liability for unpaid wages and benefits to the interns.
What Is Considered a Paid Internship in California?
The California Division of Labor Standards Enforcement (DLSE) and the U.S. Department of Labor (DOL) have both established specific criteria for determining whether an internship qualifies as paid, falling within the requirements of the FLSA. Under federal law, the following criteria must be met for an internship to be legal. In short, the internship must be for the benefit of the intern, not the employer. However, it should be noted that the federal criteria have no effect in California, where the state has rejected them.
California law imposes its own definition of who qualifies as a paid intern and what the internship must entail. Under California law, a paid intern or trainee is anyone who meets all six of the following criteria.
- The training provided is similar to that which would be given in an educational environment, including clinical and other hands-on training for medical and other similar internships.
- The training provided is for the benefit of the intern or trainee. The employer derives no immediate advantage from the activities of the trainee and, in fact, its operations may be impeded.
- The intern or trainee does not displace regular employees but works under close supervision of existing staff.
- The employer that provides the training derives no immediate benefit from activities of the trainee or learner. On occasion, its operations may actually be impeded.
- The trainee or learner is not necessarily entitled to a job at the conclusion of the training period.
- The trainee or learner’s skills are not necessarily directly related to the employer’s operations.
NOTE: If a worker does not meet all of these criteria, she is not a paid student-trainee, and she is entitled to be paid for her work. For example, even if the trainee received some education or training, and she was under close supervision, she is entitled to payment if the employer derived an immediate benefit from her work (e.g., she replaced a regular worker), or she performed routine tasks during her internship.
How Paid and Unpaid Internships Differ
"Paid" internships are just that…paid
There are many different program characteristics that distinguish paid versus unpaid internships. The most prominent of these is, of course, the fact that paid interns receive wages. However, paid and unpaid internships differ in many other respects. For example, generally speaking, paid interns only work under a fixed term agreement, whereas unpaid interns typically work under an "at will" arrangement. In addition, there are differences between the two types of positions in regard to both the benefits and the risks associated with retaining interns. For example:
Even though paid interns cannot sue under the California Labor Code for unpaid wages (whereas unpaid interns can), employers should not deceive interns into thinking that the internship is more than it is not—i.e., that they will receive compensation if they stay with the company long enough. California labor law authorities will not look kindly on such "deceit."
Interns often compete with regular employees for advancement and other benefits in some organizations.
Paid and unpaid internship programs inappropriately classified as volunteer programs could expose employers to liability.
Employers cannot treat paid interns like unpaid interns. Under California law, unpaid interns are not subject to many employment laws to which paid interns are subject.
What Employers Need to Know about Paid Internship Laws
California’s paid internship laws impose certain obligations on employers to ensure that internships are properly structured and that interns are fairly compensated for their work. At a minimum, these obligations include the following: There are other obligations as well. For example, employers must properly classify interns as employees, and ensure that they are paid at least minimum wage and overtime, if applicable. The work environment in which interns are placed must also be accommodating to their training and education. In other words, intern training should be a primary goal, and not an afterthought. Additionally, interns must be free of any financial obligation to the employer, meaning the employer should not charge the intern anything related to their training or education. This actually violates federal law, as a recent federal court ruling found that requiring that interns pay for certain training and other expenses was a clear violation of federal law. Further obligations that apply to internships in schools and colleges are discussed in a different section of this article.
The Role of Colleges and Universities
In California, internship programs offered through academic institutions with an established curriculum are a typical way for students to secure credit for internships. Even when credit is awarded, the program can still rely upon the California DOL test to determine whether the intern is owed minimum wage for their work. With that said, the presence of the academic institution can add another layer to the analysis. When an academic institution helps to establish the requirements for the internship program and decides whether credit should be awarded or not, the program may fall within the "educational" exception of California’s IWC Wage Orders, which exclude students enrolled in "educational intern/trainee programs" from coverage.
The "educational" exception exempts programs under the following conditions: While the exemption only applies to programs established under the auspices of an academic institution, this is often a requirement for educational programs anyway as it may be essential for the award of college credit for an internship.
What Interns Can Expect in Terms of Rights and Protections
Interns must also be provided with a safe workplace that is free of sexual harassment, and may file a complaint against an employer for sexual harassment, just as any other employee would. If the employer chooses to terminate an internship program, the intern should not be retaliated against as a result .
If an intern believes that his or her rights, under either the Labor Code, or ABC Test, have been violated, he or she may file a claim for unpaid wages with the California Labor Board. An action for minimum wage and overtime violations can be filed in court up to four years after the claims accrue. A lawsuit against a company may also be filed in court for conversion and breach of contract.
Recent Developments and Changes in the Law
The landmark case settled in 2018, known as the Bouchard v. Media6Degrees, Inc., initiated a significant shift in California law: it established a new standard for the duties of internship programs. While the case was settled and the defendants were not required to pay any damages, the settlement awarded the plaintiffs $180,000 in attorneys’ fees and about $500,000 in settlement costs.
As of 2019, interns that have received no benefits from their work, and have had no primary benefit from the work, are co-employees of the intermediary staffing firm and the staffing firm must pay them directly. The staffing firm must pay the interns in accordance with the Equal Pay Act and provide the interns with workers’ compensation.
California labor codes do not expressly regulate paid internship programs. However, California employers are at risk of violating intern’s rights under other acts and codes, such as the federal Fair Labor Standards Act (FLSA) and the California Division of Labor Standards Enforcement (DLSE). Programs that include unpaid or partially paid interns are at risk of violating state law (See Cal. Lab. Code §1720-1728, DLSE Enforcement Policy 2000.03.30-5 and DLSE Enforcement Policies).
The FLSA defines interns as employees unless all of the following criteria are met: An unpaid intern is not protected by the Equal Pay Act. Therefore, while an intern who has been classified as unpaid is not guaranteed the same hourly wage as a full-time employee, the employer must still follow state and federal requirements. These include: Interns who are not compensated in accordance with the laws set forth by both the FLSA and California Labor Codes are likely to be eligible for back wages. However, they are not eligible for overtime compensation or liquidated damages in relation to any unpaid minimum wages or unpaid overtime hours.
Ten Tips for Employers and Interns
Employers should conduct an internal audit of their unpaid intern programs and ask the following questions:
• Is the internship program a for fee course of the intern’s choice?
• Does the intern receive college credit?
• Does the intern perform productive work?
• Does the experience primarily benefit the intern?
• Does the internship program disrupt the business arrangement of the employer’s regular employees?
• Is there an understanding that the internship relationship and/or internship will not result in post internship employment?
• Does the internship program prepare the intern for the job market?
• Does the internship program contribute tangible academic credit towards the intern’s degree?
For internships related to health care and other technical career fields, examine the requirements, accreditations, and regulations of appropriate state and federal government agencies regarding unpaid internships. Interns, before accepting an unpaid internship position, should
• Secure a written agreement with the employer spelling out the expectations for the internship.
• Conduct thorough research on the employer’s operations, vision, mission, environment, and prepare thoughtful "stay ahead" questions to demonstrate interest in the employer’s goals.
• Prepare and be ready to discuss how the internship is expected to be mutually beneficial or contribute to future career plans.
• Stay connected with school faculty and seek assistance in making contact with employers offering internships that are eligible for school sponsorship.
• Obtain all employer-required training, orientation, or licensing required prior to the internship start date.
• Be aware of possible employer expectations regarding dress code, attendance, and participation.
• Arrive at internship early daily, stay late, leave no detail overlooked (in keeping with employer’s expectations), and effectively balance internship schedule with school and personal requirements.
Frequently Asked Questions
I’ve heard that students can come in after school for a few hours and work for free for the experience. Why can’t that happen?
California law does not exempt paid internships from the requirement to pay employees. Specifically, when the nature of the relationship is employment, employers must pay intern employees. These general rules, governing whether an intern is deemed an employee and thus entitled to compensation, can be complicated. Even the U.S. Department of Labor advises employers to use care before classifying unpaid interns as such.
Is that true even if the internship is unpaid?
Yes. Under California state law, the mere payment of any amount, even in the form of academic credit and/or a stipend can create a right to compensation under California’s wage and hour laws.
I saw that another large employer was recently sued for not paying their interns – how is this different from my small business?
These types of claims can come from large or small businesses. Whether your business is small or large, any unpaid internship or training program is going to be ripe for a claim. So even small business should have a careful and objective process to review unpaid intern and training programs. Employers should make sure they are complying with all wage and hour and other laws applicable to their businesses.
I’m thinking about putting interns to work on some specific projects this summer , are there any specific things I need to tell them?
Whether an employee is working as an unpaid intern or college student at your office, make sure that you have made it clear what they can expect from you and what you expect from them with respect to their work. It is best practice to have a mutual understanding with the student or intern as to what their responsibilities are at your facility.
My job description for this position will be to help out where help is needed. I have a presentation I am required to give to the clients for presentation skills class. Is it appropriate for me to present to the client by myself or do I have to co-present with my supervisor?
Interns may be considered employees subject to state wage laws if they contribute value to the business of the employer. As such, an intern that presents to the client, though it is unclear from your context whether this "client" has a responsibility to the interns’ participating entity or is merely a prospective lead for business, could be considered an employee under state employment laws. The obligatory understanding between the parties should make it clear whether or not the intern is being allowed to present on his/her own. If he/she is allowed to do so, this role could be consistent with that of an employee. Note too that any paid internship will implicate requirements under federal law as well, including the Fair Labor Standards Act.