Are Students in University Externship Programs “Employees” Under the Fair Labor Standards Act?
May 31, 2007
Many employers sponsor students as part of college and university extern programs. This can be a great learning opportunity for the students and a great recruiting tool for employers. But might you unwittingly be turning those students into employees? In a recent opinion letter, the Department of Labor (DOL) considered whether students participating in a university’s externship program are considered employees under the Fair Labor Standards Act (FLSA or Act) and thus entitled to wages and other protections of the FLSA.
In the inquiry presented to the DOL, the university’s students spent only one week “shadowing” an employee at a sponsoring employer’s organization. The students were not paid for their time spent at the workplace, nor did they receive any college credit for time spent in the externship program. The purpose of the program was considered purely educational and the employer-sponsors invested significant effort in designing unique experiences for the externs. Although the students did not generally perform work for the benefit of the sponsor-employer, they did perform small office tasks or assist with projects. Because of the short duration of the program, however, the sponsors did not derive any benefit from the externs’ labor and the externs did not displace any regular employees. The only potential benefit to the sponsor-employer was the opportunity to screen future potential interns or employees, although the externs were not guaranteed any such future opportunity.
The FLSA provides minimum wage and overtime protection to those employed within the meaning of the Act. The Wage and Hour Division of the DOL has previously developed six factors to consider whether a student trainee, intern, extern, apprentice, graduate assistant, or similar person is an “employee” within the meaning of the Act. The six factors previously identified by the WHD of the DOL include the following:
1) The training is similar to what would be provided by a vocational school or academic educational institution.
2) The training is for the benefit of the trainee or student.
3) The trainee/student does not displace regular employees, but works under their close observation.
4) The employer providing the training derives no immediate advantage from the trainees and on occasion the employer’s operations may actually be impeded.
5) The trainee/student is not necessarily entitled to a job at the end of the training.
6) The employer and trainee/student understand that the trainee/student is not entitled to wages for the training.
See Wage and Hour Opinion Letter May 17, 2004; Field Operations Handbook § 10b11. If all six factors are met, an employment relationship does not exist. The factors indicate that in externships where the program is an extension of the student’s academic instruction, the extern is not paid, and the employer does not receive significant benefits, then the employer-employee relationship does not exist. Where there is no employment relationship, the FLSA does not apply.
In this instance presented to the DOL, the externs’ training provided during the externship was shown to be a practical application of material being taught in the classroom, their participation in the program was very short in duration – only one week, and included “shadowing” a regular employee. Thus, these facts satisfied the first three factors identified by the WHD. Further, because of the very limited duration of the program and virtual absence of any meaningful work, the employer did not derive any tangible benefit from the externs’ work and, indeed, may actually lose productive work from the employee being shadowed by the extern. Finally, because students were clearly advised that they would not be paid for their time nor were they necessarily entitled to a job at the conclusion of the program, no employment relationship was found.
As FLSA lawsuits have become increasingly popular, clogging our court dockets, it is critically important for employers to evaluate their externship programs. Although the circumstances presented in this particular externship program may be unusually narrow (e.g., a one-week program consisting almost exclusively of shadowing a regular employee), the recent reiteration of the six factors used by the WHD is a useful reminder and tool for employers evaluating and developing new externship programs to limit the risk that externs will qualify as your employees.
For more information, e-mail Cynthia Brennan Ryan at cynthia.ryan@hklaw.com or call toll free, 1-888-688-8500.
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