Unpaid internships and externships a compliance mine field
Summary: Unless the day to day activities of an unpaid internship provides training that is primarily for the benefit of the intern and the employer providing the training derives no immediate advantage from the activities of the intern, interns and externs are employees under state and federal law and must be paid minimum wage and overtime.
In recent decades, unpaid internships and externships-internships administered by university programs through which interns can earn school credit-have become an increasingly ubiquitous part of American university education, particularly for graduate students in law school and business school. At some law schools, participation in an externship program has become a de facto graduation requirement. Proponents of such programs tout them as a novel, highly useful form of experiential learning that fills in the gaps left by traditional classroom education. To those proponents, unpaid internships and externships are a critical tool for on-the-job training, and they provide both necessary experience and an opportunity for students to demonstrate their skills to prospective employers. However, critics of unpaid internships and externship programs question the actual educational value of unpaid labor and view with skepticism the considerable cost savings that such programs generate both for universities and for sponsoring employers.
The legality-and morality-of certain unpaid internships and university externship programs is highly questionable, and the practice has begun to generate a substantial amount of litigation. For example, class-action lawsuits have been filed against both Hearst Publications and Fox Searchlight Pictures alleging the companies violated the minimum wage and overtime provisions of the Fair Labor Standards Act by illegally employing unpaid interns. Beyond these recent lawsuits, unpaid internships for private-sector employers are a widespread, controversial practice whose legality is at best unclear.
1. Many Unpaid Externships and Internships Violate The Fair Labor Standards Act of 1938
The Fair Labor Standards Act of 19385 (“the FLSA” or “the Act”) comprehensively regulates the wages of employees to whom the Act applies.6 Originally intended to alleviate oppressive working conditions, the New Deal-Era statute imposes a number of requirements upon employers, including the requirement that many employees be paid “time-and-a-half” overtime wages for any hours over forty worked in one week, restrictions upon the employment of children, and a minimum hourly wage. This Part first describes which workers are covered as “employees” under the FLSA. Second, this Part explains the mechanism by which employers may legally pay students less than minimum wage. Third, this Part explains the narrow exemptions from the Act’s protections for volunteer work, vocational training, and bona fide educational externships that do not substantially benefit the employer. Finally, this Part argues that the vast majority of externships at private-sector employers fail to fall within any of the FLSA’s narrow exemptions, and therefore violate the Act’s minimum wage protections by illegally taking advantage of unpaid labor.
2. Don’t Confuse Unpaid Internships With Volunteer Labor and Vocational Training Programs
Although the definition of “employee” under the FLSA is extraordinarily broad, the Supreme Court has acknowledged that certain categories of working relationships do not fall within the employer-employee category, and therefore are not subject to the Act’s minimum wage guarantees. The primary exceptions carved out by the Supreme Court are (1) “those who, without any express or implied compensation agreement, might work for their own advantage on the premises of another,” also known as vocational trainees, and (2) volunteers. This Section describes the two seminal Supreme Court cases that limited the scope of the FLSA’s uniquely expansive definition of “employ” to exclude those who use an employer’s resources strictly for their own benefit and volunteers, Walling v. Portland Terminal Co. and Tony & Susan Alamo Foundation v. Secretary of Labor, respectively.
In Portland Terminal Co., the Supreme Court reined in the FLSA’s uniquely expansive definition of “employee” by clarifying that it “was obviously not intended to stamp all persons as employees who, without any express or implied compensation agreement, might work for their own advantage on the premises of another.” The case was a challenge to a railroad’s practice of offering unpaid “practical training to prospective yard brakemen” that lasted seven or eight days. The railroad hired its brakemen only from a list it maintained of qualified workers, and successful completion of the training program was a prerequisite to being included on the list. After successful completion of the program, each brakeman was given a retroactive daily allowance of four dollars. The Division brought suit against the railroad company, arguing that the railroad company’s practice violated the Act’s minimum wage provisions.
The Supreme Court held that the practice did not violate the Act, and found especially dispositive that the each worker’s “activities do not displace any of the regular employees, who do most of the work themselves, and must stand immediately by to supervise whatever the trainees do. The applicant’s work does not expedite the company business, but may, and sometimes does, actually impede and retard it.” The Court especially focused on the fact that the employer received no immediate and material advantage from the work performed by the trainees, contrasting the practice with a hypothetical situation where “an employer has evasively accepted the services of beginners at pay less than the legal minimum without having obtained permits from the administrator.” As discussed in Part II.B.3, infra, the Court’s reasoning for exempting the railroad company’s training program in Portland Terminal Co. underlies the Department of Labor’s entire policy about the applicability of the FLSA to unpaid interns and externs.
In Tony and Susan Alamo Foundation v. Secretary of Labor, the Court acknowledged an exemption from the FLSA for bona fide volunteers. The Division had brought suit against a private nonprofit religious organization for the unpaid minimum wages of the organization’s “associates.” The organization ran several commercial businesses to finance its nonprofit religious operations, and the associates were rehabilitated “drug addicts, derelicts, [and] criminals” who worked for the organization’s commercial businesses in exchange for food, shelter, clothing, and other benefits, but no wages. Notably, despite the protestations of the associates that they were not employees and did not expect to be paid, the Supreme Court held that they were statutory employees and therefore that the organization had violated the Act by failing to pay them a minimum wage.
In holding that the associates were employees under the Act, the Court emphasized the economic reality test that it first applied in the FLSA context in Rutherford Food Corp., and distinguished the associates from the brakemen in Portland Terminal Co., noting that the associates were financially dependent on the organization for long periods of time, up to several years. The Court held that a compensation agreement can be implied-in-fact and need not be explicit or even acknowledged by the employee. In applying the economic reality test to find that the associates were statutory employees, the Court insisted that a worker’s protestation that she is not actually an employee entitled to minimum wages is entirely irrelevant, stating that “the purposes of the Act require that it be applied even to those who would decline its protections.” The Court further explained that to allow the Foundation to employ its associates at substandard wages would give it an unfair commercial advantage that the FLSA was intended to prevent. However, the Court expressly noted that bona fide volunteers are not employees under the Act, and it distinguished such actual volunteers from those who work voluntarily in otherwise nonexempt positions for substandard pay in violation of the FLSA’s minimum wage protections.
Portland Terminal Co. and Tony & Susan Alamo Foundation are the seminal decisions that define the rough boundary among “those who, without any express or implied compensation agreement, might work for their own advantage on the premises of another,” bona fide volunteers, and implied-in-fact employees who claim that they are volunteers but are actually entitled to minimum wages under the Act. This Article argues that unpaid interns and externs who work at private-sector businesses fall into the latter category, and are covered employees who are entitled to be paid minimum wage despite their protestations to the contrary. The following Section describes the Department of Labor’s advisory publications that attempt to clarify the employee status of unpaid interns and externs under the FLSA.
3. Under Certain Limited Circumstances Unpaid Internships and Externships Can Be Valid
Following the Supreme Court’s jurisprudence that exempts both “those who, without any express or implied compensation agreement, might work for their own advantage on the premises of another” and bona fide volunteers from the FLSA’s minimum wage guarantees, the Wage and Hour Division has distributed some advisory publications that clarify the employee status of unpaid interns and externs under the FLSA. In a 2006 opinion letter sent to a redacted party, the Wage and Hour Division responded to a query whether participants in a university externship program were employees under the FLSA.
The April 6, 2004, Wage and Hour Opinion Letter draws its reasoning directly from Portland Terminal Co., which created a narrow exemption from the FLSA’s minimum wage mandate strictly for the purpose of vocational, “on the job” training solely for the benefit of the trainee. Thus, the Letter’s factors for FLSA minimum wage exemption for trainees focus heavily upon the vocational training and educational aspects of the programs that it discusses. Because of the Act’s uniquely broad ambit of coverage and the historically remedial purposes for which it was enacted, courts should continue to construe any exemptions to the Act’s coverage narrowly to discourage employers from improperly taking advantage of unpaid student labor. While the Division’s April 6, 2004, Wage and Hour Opinion Letter opined only about participants in a university externship program or in a vocational training program, the Division has also issued guidance about the employee status of unpaid interns who work for private-sector, “for profit” organizations independent of a university externship program.
The Division’s Fact Sheet #71,73 distributed in April 2010, provides crucial guidance about the employee status of unpaid interns for private, “for profit” entities. As in the April 6, 2004, Wage and Hour Opinion Letter, the Division opines both (1) that the determination of employee status is emphatically a function of facts and circumstances and (2) that, under certain circumstances, such unpaid interns will not be considered employees under the Act. In the Fact Sheet, the Division articulates a version of the six factors for employee status that subtly but notably differs from the Wage and Hour Opinion Letter’s version:
- 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;
- The internship experience is for the benefit of the intern;
- The intern does not displace regular employees, but works under close supervision of existing staff;
- 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;
- The intern is not necessarily entitled to a job at the conclusion of the internship; and
- The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.
Unsurprisingly, the factors described in Fact Sheet #71 are remarkably similar to those promulgated in the April 6, 2004, Wage and Hour Opinion Letter because both closely track the Court’s decision in Portland Terminal Co.. Notably, however, Fact Sheet #71 differs from the April 6, 2004, Wage and Hour Opinion Letter because it stresses the first and fourth-educational similarity between the internship and a bona fide educational environment and the requirement that an employer derive no immediate benefit from an intern’s work. The Fact Sheet clarifies that if the interns are engaged in the operations of the employer or are performing productive work (for example, filing, performing other clerical work, or assisting customers), then the fact that they may be receiving some benefits in the form of a new skill or improved work habits will not exclude them from the FLSA’s minimum wage and overtime requirements because the employer benefits from the interns’ work.
This clarification underscores the troubling reality of unpaid internships with private employers-that many unpaid interns routinely perform productive work that directly benefits their employers. While the characterization of the work of unpaid interns and externs as substantially productive and directly beneficial to employers is of course debatable, we should more carefully interrogate the reality of the widespread, normative use of entirely unpaid labor. Certainly there is significant variation in the quality and quantity of work performed by unpaid interns and externs, but the FLSA demands (1) that workers be paid a minimum wage by default, (2) that any exceptions be narrowly construed and individually evaluated with an eye to the remedial purposes of the minimum wage requirement, and (3) that quality or speed of work is not a factor in determining entitlement to minimum wage, so there is no defense that an inexperienced novice took too many hours or generated amateurish work product.
4. Sponsoring Organizations, Universities and Individual Program Administrators and Faculty Members Are Joint Employers Under The Law And Can Be Held Jointly and Individually Liable For Unpaid Wages.
The previous Section established the uniquely broad ambit of working relationships covered by the FLSA. Whether any particular worker is an “employee” under the Act, and therefore is entitled to a minimum wage for her work, is a facts and circumstances inquiry governed by the economic reality test. In short, if the economic reality of a working relationship is that the worker is working under the employer’s supervision for the benefit of the employer, then that worker is a statutory employee. Although the FLSA makes exemptions for certain types of employees, and the Department of Labor has issued guidance that certain classes of workers are not employees if working primarily for their own benefit, these exemptions are narrow, and the vast majority of working relationships will be covered by the Act.
This Part describes the extraordinarily long reach of liability for damages under the Act. Liability for unpaid minimum wages under the Act extends to any “employer” of an employee. Like its definition of “employee,” discussed in the previous Part, the Act’s definition of “employer” is uniquely broad, and the label potentially extends to a broad range of actors primarily because of two mechanisms. First, the FLSA imposes joint liability for unpaid wages upon joint employers of an employee. Because the Act imposes liability for unpaid minimum wages upon any employer of an employee, liability for those damages can simultaneously extend to multiple culpable entities. Second, individual actors can qualify as employers under the Act, and therefore the Act imposes individual liability upon guilty individuals as well as other entities.
This Part first explains the mechanisms for joint liability for joint employers under the Act. Second, this Part argues that liability may extend to third-party employers who directly cause a violation of the FLSA, even if there is no direct or joint employer-employee relationship between that employer and the aggrieved employee. Third, this Part explains that contrary to normal notions of limited liability under the corporate structure, liability for unpaid wages extends to individual persons who qualify as an “employer” by exercising significant control over employees, regardless of whether the entity is a corporation or not. Fourth, this Part argues that, under the FLSA, many universities will qualify as joint employers of unpaid interns and externs that they sponsor, and therefore that liability for the unpaid minimum wages of law student externs will often extend to sponsoring schools in addition to the sponsoring organizations that directly employ interns and externs. Fifth, this Part argues that, even if universities are not joint employers under the Act, liability for unpaid wages will often extend to them nonetheless as third-party employers who directly cause violations of the FLSA. Finally, this Part argues that university administrators who administer externship programs and internship supervisors are “employers” under the Act in their individual capacities, and therefore that they should be, and often will be, individually liable for unpaid wages due to interns and externs.
5. FLSA Imposes Joint Liability for Unpaid Wage Violations upon Joint Employers
The FLSA imposes liability for unpaid minimum wages upon any “employer” of an employee. The Act defines the term broadly to include “any person acting directly or indirectly in the interest of an employer in relation to the employee.” Moreover, as the next Section discusses in more detail, the Act further defines “person” to include any “individual,” creating liability for damages for individual natural persons as well as for legal persons. The broad definition of “employer” means that multiple employers can be liable for the same unpaid minimum wage damages if the employee is employed by both at the same time. Whether a joint employment relationship exists among two or more employers and an employee depends on the facts of each case and is a function of the employee’s working relationship with each employer. This Section describes Department of Labor regulations and the leading judicial standard, expressed in Zheng v. Liberty Apparel Co., for determining whether a joint employment relationship exists under the Act.
The Department of Labor has helped clarify the circumstances that give rise to a joint employment relationship by issuing a set of binding regulations called “Joint Employment Relationship Under the Fair Labor Standards Act of 1979.” These regulations set the responsibilities of joint employers for payment of minimum wages under the Act, and declare that “if the facts establish that the employee is employed jointly by two or more employers, . . . all of the employee’s work for all of the joint employers during the workweek is considered as one employment for purposes of the Act.” Under these regulations, all joint employers are “responsible, both individually and jointly, for compliance with all of the applicable provisions of the [A]ct. . . .” Having established general joint and several liability between joint employers for any violations of the Act, the regulations proceed to identify three more specific situations where a joint employment relationship will exist:
Where the employee performs work which simultaneously benefits two or more employers, or works for two or more employers at different times during the workweek, a joint employment relationship generally will be considered to exist in situations such as:
(1) Where there is an arrangement between the employers to share the employee’s services, as, for example, to interchange employees; or
(2) Where one employer is acting directly or indirectly in the interest of the other employer (or employers) in relation to the employee; or
(3) Where the employers are not completely disassociated with respect to the employment of a particular employee and may be deemed to share control of the employee, directly or indirectly, by reason of the fact that one employer controls, or is controlled by, or is under common control with the other employer.
Although these regulations described above carry the force of law, few court decisions have relied upon them to reach a decision about joint employment under the FLSA.
Rather, courts apply a substantially similar multi-factor test, somewhat akin to the economic reality test, to determine whether a joint employment relationship exists among an employee and multiple employers. For decades courts applied a four-factor test initially developed by the Ninth Circuit in Bonnette v. California Health & Welfare Agency. However, in 2003 the Second Circuit, calling the Bonnette four-part test “unduly narrow” and holding that it could not be reconciled with the uniquely expansive definition of “employee” under the FLSA, developed a new, more expansive six-part test in Zheng v. Liberty Apparel Co. The Zheng test for joint employment draws from the reasoning of Rutherford Food Corp., and considers the following factors: (1) whether the putative joint employer’s premises and equipment are used for the employee’s work; (2) whether the subcontractor (or the employee’s primary employer, generally) has a business that can or does shift from one other employer to another; (3) the extent to which the workers perform a line job integral to the joint entity’s process of production; (4) whether responsibility under the contracts could pass from one subcontractor to another without material changes; (5) the degree to which the putative joint employer supervises the employee’s work; and (6) whether the workers work “exclusively or predominantly” for the putative joint employer. Additionally, the test urges district courts to “consider any other factors it deems relevant to its assessment of the economic realities” of the working relationship.
In Zheng, the plaintiffs were a group of garment workers directly employed by a small contractor. A much larger garment manufacturer had hired the contractor to work on its garment manufacturing line, and the workers worked in the manufacturer’s own factory. Additionally, their work was integral to the business operation of the manufacturer, and they worked under the close supervision of the manufacturer’s inspectors. The workers sued the manufacturer for FLSA violations, claiming that it was a joint employer under the Act. Applying the Bonnette factors, a district court granted summary judgment for the manufacturer, holding that no joint employment relationship existed. The Second Circuit reversed and rejected the Bonnette test, holding that the manufacturer was a joint employer under the economic reality of the working relationship, and created the Zheng test. Because the Zheng court was considering joint employment in the context of garment workers who worked as subcontractors for a manufacturing company, certain of its factors speak in manufacturing terms, but the precedent, and its broad list of factors, applies in any employment context. The scope of liability for joint employers is notably broad under Zheng, and employers may be exposed to liability as joint employers through a wide variety of working relationships. However, liability for an employee’s unpaid minimum wages can likely also extend even to an employer who neither directly employs that employee nor qualifies as a joint employer under Zheng, but rather simply causes another employer’s violation.
6. The FLSA Imposes Individual Liability for Unpaid Wage Violations upon Individuals Who Exercise Sufficient Control Over Employees
As discussed above, the FLSA defines “employer” broadly to include “any person acting directly or indirectly in the interest of an employer in relation to an employee.” “Person” is also defined notably broadly to include, inter alia, “an individual.” Thus, any individual can be subject to individual liability for a minimum wage violation if he qualifies as an “employer” by acting in the interest of an employer in relation to an employee. The primary consideration whether an individual will be subject to individual liability under the FLSA is whether the individual has exerted sufficient control over significant aspects of the employer’s employment practices, particularly pay. In any case, the standard for imposing individual liability under the FLSA is considerably lower than the veil-piercing requirements required by traditional corporate law. Generally speaking, courts have found employer status for an individual when the individual has managerial responsibilities and exercises significant control over the terms and conditions of an employee’s employment. Additionally, an individual will qualify as an employer if that individual has supervisory authority over an employee, is partially or wholly responsible for the violation, or has control over the employer’s compliance with the FLSA.
As with all other inquiries of employer and employee status under the FLSA, whether an individual qualifies as an employer, and therefore is subject to individual liability, is a matter of facts and circumstances governed by the economic reality of the situation. The following Sections argue that (1) universities often will qualify as joint employers of unpaid interns and externs that they sponsor and therefore should be held jointly liable for unpaid minimum wages under the Act; (2) even if universities are not joint employers under the Act, they should be held liable as third-party employers who cause FLSA violations under Sibley; and (3) university administrators and externship supervisors often will individually qualify as employers because they exercise significant control over the terms and conditions of the employment of interns and externs.
7. Sponsoring Organizations and Universities Are Joint Employers of Interns and Externs and Are Jointly Liable for Unpaid Minimum Wages
Universities will often qualify as joint employers of unpaid interns and externs under the Zheng test because they are FLSA-covered employers who (1) significantly benefit from the work of unpaid interns and externs, (2) exercise significant control over the terms and conditions of an unpaid intern or extern’s employment relationship, (3) and furnish the facilities and resources necessary for the completion of internship work. Universities are FLSA-covered entities per se so long as they have at least two employees, so generally they do not need to satisfy any other jurisdictional prerequisites to fall under FLSA coverage. Although student interns and externs are not employees of the universities they attend in a conventional sense, universities should qualify as joint employers, and therefore be subject to joint liability for unpaid minimum wages, because they benefit significantly from the unpaid working arrangement with sponsoring organizations and because they exercise a significant amount of control over almost every aspect of the terms and conditions of the employment of interns and externs, including, and especially, the decision to pay the interns no wage.
Universities significantly benefit from the unpaid work of participants in externship programs primarily because the operation of an externship program helps to dramatically reduce the university’s operating costs. The traditional educational model for a university is that students take classes taught by professors in exchange for school credit. Each professor is paid either a yearly salary or a per-credit salary based on the number of credits she teaches, and, generally speaking, each professor is expected to teach some classes each semester. Therefore, ordinarily the amount of tuition each student pays is directly correlated to the school’s costs of operation via its faculty salaries – students are expected to take, say, ninety credits over the course of their education, and the school must pay professors to teach ninety credits per student. Thus is the traditional model of university education.
However, a school’s decision to offer credits in exchange for participation in an externship program can dramatically reduce a school’s operating costs. Imagine a university that requires it students to earn ninety credits to graduate. If half of the university’s students receive six credits through an externship program over the course of their time at the school, the school can offer 87 rather than 90 credits of classes to each student without increasing its average class size. Assuming that each credit costs a university the same amount to offer, offering three fewer credits out of a catalogue of ninety allows a school to save 3.3 percent of its faculty budget.
Universities also exercise significant control over the terms and conditions of student unpaid externships, primarily because they can refuse to approve the award of credits to participants in the programs. Many externship programs require participants to have their jobs pre-approved, and participants must explain the substance of the work they will be performing in varying levels of detail depending on the university. Furthermore, many schools require externship program participants to file hour logs and periodically write check-in assignments throughout the length of their externships. Because a university can deny credits to externship participants if it is not satisfied with any of the terms and conditions of the student’s externship-i.e. the number of hours worked or the substantive character of the work performed-universities should qualify as joint employers under Zheng.
Finally, universities should qualify as joint employers because they furnish many of the facilities and resources necessary for an extern’s completion of his unpaid work. For example, in the context of law school externship programs, many externs continue to use their access to the Westlaw and LexisNexis research databases, provided by the school ostensibly for academic purposes, throughout their externships and for the benefit of their employers. Some authors have suggested that many private sector law firms hire unpaid interns solely for the free access to legal research databases that students bring with them. Additionally, universities offer their library resources, the expertise of library staff, and library space itself for the unfettered use of students, many of whom certainly use these resources and facilities to help them complete externship work.
Because many universities benefit significantly and materially from the unpaid work of their student interns and externs, exercise substantial control over the terms and conditions of the work of those interns and externs, and furnish resources and facilities necessary for the completion of externship work, they should be considered joint employers under Zheng, and therefore jointly liable for unpaid minimum wages. The next Section argues that even if universities are not joint employers under Zheng, many should be jointly liable regardless under Sibley as third-party employers who proximately cause FLSA violations.
8. Many Universities May be Liable for Unpaid Minimum Wages under Sibley Because They Are “An Employer” Who Directly Caused an FLSA Violation
The previous Section argued that many universities are jointly liable for the unpaid minimum wages of their students who participate in externship programs because they are joint employers under Zheng. However, even if universities do not qualify as joint employers under Zheng, many of them should be jointly liable nonetheless under Sibley’s extension of liability to third-party employers who proximately cause a violation. Although Sibley was a Title VII case, Part II.B argued that it should also apply in the FLSA context both because the text of the FLSA allows it and because such an application would effectuate the remedial policy of the Act. Universities that administer externships that do not qualify for FLSA exemption would be liable under Sibley because they are FLSA-covered employers who, although not in a direct or joint employer-employee relationship with their student externs, directly cause FLSA minimum wage violations by acting as the sole intermediary between unpaid externs and their sponsoring entities, thereby directly facilitating minimum wage violations.
Universities that administer unpaid externships that violate the minimum wage requirement are in a remarkably similar position to the defendant hospital in Sibley. In that case, the hospital was not the plaintiff nurse’s direct employer, but the court found it enough to impose liability upon the hospital that it did “control the premises upon which [the nurse’s] services were to be rendered, including [his] access to the patient for purposes of the initiation of such employment.” Like the hospital in that case, universities have absolute control over student access to the externship employers for whom they work. Without university-administered externship programs, for-credit unpaid externship jobs would not exist at all. In a very real sense, universities absolutely control externs’ access to their employers for initiation of their employment. Universities do not typically have absolute control over the premises upon which unpaid externs render their services. However, as the previous Section argued, it is likely that externs perform a significant portion of their work on school premises and using school resources.
Universities may, and should, be jointly liable for the unpaid minimum wages of any externship program participants who qualify as “employees” under the FLSA, both as joint employers under Zheng and as third-party employers who directly cause an FLSA violation under Sibley. Moreover, because the FLSA imposes individual liability upon any individuals who also qualify as an “employer” under the FLSA, a significant number of people may also be individually liable, including university administrators and extern supervisors.
9. Many University Externship Program Administrators and Other Individuals Should Be Individually Liable for the Unpaid Minimum Wages of Interns and Externs
Because the FLSA imposes individual liability upon any individual who qualifies as an employer, broadly defined as any person who acts in the interest of an employer in relation to an employee, the class of people potentially individually liable for unpaid minimum wages of interns and externs is large. Generally speaking, individuals will be subject to individual liability if they exert significant control over an employer’s employment practices, particularly pay; if they exercise managerial authority over employees; if they are personally responsible for the violation; or if they are responsible for the employer’s general compliance with the FLSA. In the context of unpaid interns and externs who work for private-sector employers, two classes of people may be subject to individual liability: (1) university officials who administer illegal externship programs and other school officials significantly involved in the decision to sponsor illegally unpaid internships and externships, and (2) individuals responsible for hiring and supervising unpaid interns and externs at their sponsoring employers.
University officials who administer externship programs that place interns and externs in illegally unpaid jobs may be subject to individual liability under the FLSA because they exercise managerial authority over externs and they are significantly responsible for the university’s continued FLSA violations. In many externship programs, such administrators exercise managerial authority over externs by having the ultimate discretion whether to award school credit. Additionally, externship program administrators have significant managerial authority over the terms and conditions of an extern’s employment such that they act as de facto supervisors. For example, in many externship programs administrators must approve the number of hours an extern will work, who will supervise the extern, and exactly what types of work the extern will be doing before she can even begin the externship. Such involvement in the terms and conditions of the extern’s employment, coupled with the administrator’s ultimate authority to decide whether the extern will receive credit, means that externship program administrators may be individually liable for any illegal unpaid externships that they oversee.
In addition to university officials who actively administer externship programs, school administrative officials who approve the existence and maintenance of illegal externship programs, such as law school deans, may also be subject to individual liability under the Act. High-ranking university officials are partially responsible for university FLSA compliance, and their decisions to maintain the existence of such programs directly affect the pay (or lack thereof) of many student participants. Like CEOs and company presidents who have been held individually liable for widespread FLSA violations at their companies, higher-ranking university administrators may be subject to individual liability for widespread violations at their universities.
Finally, supervisors of illegally unpaid interns and externs may be held individually liable for FLSA violations if they are significantly involved in hiring and the decision to pay zero wages to interns and externs. Such supervisors are likely to have significant authority over the substantive terms and conditions of an extern’s employment. Moreover, supervisors and those in charge of hiring are directly complacent in violations by being personally involved in the day to day work of unpaid employees. Of course, like the holistic inquiry of employer status under the FLSA, whether any particular individual will be held individually liable is a function of facts and circumstances, but any individual who falls within the FLSA’s uniquely broad definition of “employer” will be individually liable for damages if the unpaid internship or externship does violate the FLSA.