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Wednesday, April 14, 2010

DLSE Sets Forth Test for Unpaid Interns

In a new opinion letter authored by Acting Chief Counsel David Balter, the DLSE has revised the standard for determining whether "trainees" are exempt from California's minimum wage requirements.

The opinion letter considered a program called "Year Up, Inc., a non-profit 501(c)(3) organization (the 'Program'), that serves 18-24 year olds in primarily underserved communities who have not progressed beyond a GED or high school diploma. The objective of the program is to 'close the Opportunity Divide by providing urban young adults with the skills, experience, and support that will empower them to reach their potential through professional careers and higher education.'" Year Up sought an opinion "as to whether California law requires that the trainee/interns enrolled in the program are to be treated as employees subject to California’s wage and hour laws."

Stating that California law does not answer this question, the letter looks to federal regulations for help and notes that the DOL has used a six-part test to determine whether a "trainee" is exempt from minimum wage requirements:
  1. The training, even though it includes actual operation of the employer’s facilities, is similar to that which would be given in a vocational school;
  2. The training is for the benefit of the trainees or students;
  3. The trainees or students do not displace regular employees, but work under their close observation;
  4. The employer derives no immediate advantage from the activities of trainees or students, and on occasion the employer’s operations may be actually impeded;
  5. The trainees or students are not necessarily entitled to a job at the conclusion of the training period; and
  6. The employer and the trainees or students understand that the trainees or students are not entitled to wages for the time spent in training.

The letter then disavows use of an eleven-factor test previously outlined in a number of opinion letters.

In the past, DLSE has articulated an “11-factor test” which consisted of the 6 factors from DOL’s criteria interpreting federal law, plus 5 additional factors which are identified in Wilcox, California Employment Law, §104[1](e). (See also, DLSE OLs 1998.11.12, 1993.10.21) However, the 5 additional factors do not appear to be based upon any source statute or regulation from which they derive nor are the additional factors identified with specific case law. More recently, DLSE applied a 6-factor test for the trainee/intern exemption under an economic realities test for determining an employment relationship where the 6 factors differed, in part, from the above-stated 6 factors used by DOL. (DLSE OL 2000.05.17)

Through an exhaustive analysis of the facts provided, the letter finds that Year Up satisfies the six-factor test. The opinion letter is here. The DLSE web pages for all opinion letters are here: organized by date, organized by topic, and those withdrawn since Arnold Schwarzennegger became Governor in 2003.

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