Determining Whether You Must Pay Your Interns

Internships can be mutually beneficial, but not all internships may be unpaid, contrary to what it seems many believe. Set out below is guidance from the US Department of Labor on the issue:

Fact Sheet #71: Internship Programs Under The Fair Labor Standards Act

This fact sheet provides general information to help determine whether interns must be paid the minimum wage and overtime under the Fair Labor Standards Act for the services that they provide to “for-profit” private sector employers.

Background

The Fair Labor Standards Act (FLSA) defines the term “employ” very broadly as including to “suffer or permit to work.”  Covered and non-exempt individuals who are “suffered or permitted” to work must be compensated under the law for the services they perform for an employer.  Internships in the “for-profit” private sector will most often be viewed as employment, unless the test described below relating to trainees is met.  Interns in the “for-profit” private sector who qualify as employees rather than trainees typically must be paid at least the minimum wage and overtime compensation for hours worked over forty in a workweek.

The Test For Unpaid Interns

There are some circumstances under which individuals who participate in “for-profit” private sector internships or training programs may do so without compensation.  The Supreme Court has held that the term "suffer or permit to work" cannot be interpreted so as to make a person whose work serves only his or her own interest an employee of another who provides aid or instruction.  This may apply to interns who receive training for their own educational benefit if the training meets certain criteria.  The determination of whether an internship or training program meets this exclusion depends upon all of the facts and circumstances of each such program.

The following six criteria must be applied when making this determination:  read more here.

This blog post is not intended to consist of legal advice and you should always consult with a lawyer before acting on anything you find on the Internet.  If you have questions or comments about this post, about the topic, or if you need legal assistance, you should feel free to give us a call or send us an email.

Limited Liability Protection of NY LLCs Limited

On December 29, 2014, Assembly Bill 8106-C / Senate Bill 5885-B became the law in New York. In part, the new law makes the ten LLC members with the largest ownership interests in the LLC personally liable, jointly and severally, “for all debts, wages or salaries due and owing to any of [the LLC’s] * * * laborers, servants or employees, for services performed by them for” the LLC. The new law took effect on February 25, 2015.

This concept is not new to New York law, as it has been the case for quite some time that the ten largest shareholders of every privately held corporation in New York also have had the same obligation. Specifically, Section 630 of the New York Business Corporation Law makes every privately held corporation’s ten largest shareholders personally liable, jointly and severally, “for all debts, wages or salaries due and owing to any of [the corporation’s] . . . laborers, servants or employees other than contractors, for services performed by them for such corporation.”

Prior to the new law, members of a limited liability company generally would not be held personally liable for obligations of the LLC. But the new law creates a limitation to the limited liability protections of an LLC by essentially negating limited liability altogether with respect to workers’ claims for unpaid wages.

Under the new law, in order for a worker to hold the ten largest members of an LLC liable for compensation owed to the worker, the worker must, within 180 days after he or she stops working for the LLC, give notice to the members of the worker’s intention to hold them personally liable for the worker’s unpaid compensation. This notice requirement also parallels that set out in the Business Corporation Law.

Before a worker may hold the members with the largest ownership interests liable for the worker’s unpaid compensation, (i) the worker must recover a judgment against the LLC for the unpaid compensation, and (ii) an execution against the LLC for that judgment must be returned unsatisfied. Within 90 days of the return of the execution, the worker must then file a lawsuit against the members individually in order to obtain a judgment against them for the unpaid wages.

This blog post is not intended to consist of legal advice and you should always consult with a lawyer before acting on anything you find on the Internet.  If you have questions or comments about this post, about the topic, or if you need legal assistance, you should feel free to give us a call or send us an email.