Memorandum of Understanding

Unpaid Interns/Volunteers

When must an intern be paid: All “employees” of a business must be paid at least minimum wage unless they are a “trainee” under the law, regardless of whether they are called an “intern.”  So, what makes a trainee? The United States Department of Labor (DOL) has established a six-factor test couched in terms of – you guessed it – training – to determine whether an unpaid intern should be considered an employee or trainee under the Fair Labor Standards Act (FLSA):

   the training is similar to that which would be given in a vocational school (even though it includes actual operation of the facilities of the employer);

    the training is for the benefit of the trainees;

    the trainees do not displace regular employees, but work under their close observation;

    the employer that provides the training derives no immediate advantage from the activities of the trainees, and on occasion operations may actually be impeded;

    the trainees are not necessarily entitled to a job at the conclusion of the training period; and

    the employer and the trainees understand that the trainees are not entitled to wages for the time spent training.

 State and local government agencies and non-profit organizations can generally utilize interns or volunteers without an obligation to pay them under the FLSA. It is important, though, that the volunteers understand they are not to be paid for their time. Volunteer work at non-profit, religious, charitable, and civic organizations have specifically been cleared by the Texas Workforce Commission.

  So, what makes a trainee? The United States Department of Labor (DOL) has established a six-factor test couched in terms of – you guessed it – training – to determine whether an unpaid intern should be considered an employee or trainee under the Fair Labor Standards Act (FLSA):

    the training is similar to that which would be given in a vocational school (even though it includes actual operation of the facilities of the employer);

    the training is for the benefit of the trainees;

    the trainees do not displace regular employees, but work under their close observation;

    the employer that provides the training derives no immediate advantage from the activities of the trainees, and on occasion operations may actually be impeded;

    the trainees are not necessarily entitled to a job at the conclusion of the training period; and

    the employer and the trainees understand that the trainees are not entitled to wages for the time spent training.

When can I hire an unpaid intern or volunteer: The six-factor test is primarily used in the, “for profit,” private sector. State and local government agencies and non-profit organizations can generally utilize interns or volunteers without an obligation to pay them under the FLSA. It is important, though, that the volunteers understand they are not to be paid for their time. Volunteer work at non-profit, religious, charitable, and civic organizations have specifically been cleared by the Texas Workforce Commission.

What about true student interns: Student interns are not evaluated differently by the DOL. They should easily meet the trainee test.

What do these factors really mean: Our internship program is structured around a classroom or academic type experience. We provide the individuals with skills applicable to various employment settings, not just skills particular to the employer’s business. Essentially, the employer provides the intern or volunteer with valuable training. Ideally, the training makes them more marketable in the open job market. The intern or volunteer is not used as a replacement for a regular employee or to reduce their workload. The intern or volunteer receive more supervision than a regular employee. The work done by an unpaid intern is secondary to their training. An intern that is hired by an employer on a trial basis (Contract To Hire) with the expectation that they will eventually be hired full time will likely be considered an employee under the FLSA. Employers should indicate prior to the start of the internship that there is no guarantee or expectation of hiring the interns upon completing the internship. A written agreement (Memorandum of Understanding) indicating this is signed. Employers should indicate prior to the start of the internship that there is no intention to pay the intern. A written agreement indicating that the intern will not be paid and does not expect to be paid within the semester session.

What about discrimination laws: It depends on whether the person in question receives “significant remuneration” for their efforts. The Courts have determined that things like academic credit, practical experience, and scholarly research do not constitute significant remuneration. Because this point is subject to interpretation, however it is best to treat all interns and volunteers as though they are employees with respect to discrimination laws.

Our intern program is structured like an academic program.  The interns do not do the work of regular employees and are heavily supervised.  The interns are not paid and are aware there is no guaranty of employment within the sports industry.

 “Trainees” Memorandum of Understanding a short half-page agreement outlining the guidelines. Volunteers, sign a one-paragraph agreement acknowledging their status as a volunteer that reflect guideline of EEOC.

 In addition to the items above, require that the trainees keep track of their hours so you have a record of how much they might be entitled to if the DOL audits and rules them employees. Be sure they do not work more than 40 hours to avoid increasing the risk to include overtime. Have the trainees and their supervisors keep a log of their activities so that there is no confusion regarding the type of work they do.