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Your Business & the Law: A Labor & Employment Newsletter

July 24, 2019

You Mean We Might Have to Pay the Intern?

Gary S. Peeples, Attorney

Summertime means late sunsets, long vacations--and the sight of interns around the office. 

Although internships may be paid or unpaid, unpaid internships grew in popularity during the Great Recession, when many companies wanted to fill low-level positions but did not have the money to pay workers to fill those jobs. The solution? Unpaid interns, who were often college students or recent graduates eager to gain experience in a particular field.    

During the Obama administration, the Department of Labor (DOL) adopted a stringent six-part test regarding the classification of interns. If any one of the six components of the test was not met, then the DOL’s position was that the intern was actually an employee, and thus entitled to minimum wage and overtime. 

Unpaid internships came under further scrutiny when plaintiffs’ lawyers began filing lawsuits on behalf of large groups of interns, alleging that various interns should have been classified as employees under the Fair Labor Standards Act (FLSA). The most notable case in this vein was Glatt v. Fox Searchlight Pictures, Inc., 791 F.3d 376 (2d Cir. 2015), which involved a group of unpaid interns who had either worked on a movie called Black Swan or at Fox’s corporate offices in New York City. In that case, the Second Circuit ultimately reversed the district court’s decision, sided with Fox, and adopted a flexible seven-factor balancing test regarding the classification of interns under the FLSA.

In 2018, the DOL adopted the seven-factor balancing test from Glatt, which is significantly less stringent than the test that the agency used under the Obama administration. On the whole, the test is designed to ascertain which party (i.e., the intern or the company) is the so-called “primary beneficiary” of the relationship. If the primary beneficiary is the intern, then the internship need not be a paid one.  The internship must be a paid one, however, if the primary beneficiary is the company. 

In particular, the seven factors are: (1) the extent to which the intern and the company clearly understand that there is no expectation of compensation; (2) the extent to which the internship provides training or learning opportunities that would be similar to those provided in an educational environment; (3) the extent to which the internship is tied to a formal education program (e.g., whether the intern receives course credit for the internship); (4) the extent to which the internship corresponds to the academic calendar; (5) the extent to which the internship is limited to a period in which the intern is actually learning; (6) the extent to which the intern’s work complements (as opposed to displaces) the work of paid employees; and (7) the extent to which the intern and the company understand that the internship will not entitle the intern to a paid position at the end of the internship.

No single factor is typically conclusive. Nevertheless, there are some general principles that companies can observe to stay compliant with the FLSA when using unpaid interns. 

First, companies should establish at the outset with interns the parties’ expectations regarding compensation (i.e., that there will be no compensation) and future paid employment (i.e., that unpaid internships do not inevitably lead to job offers). Companies should also keep in mind that any unpaid internship program should have an actual and substantial educational component; unpaid interns should not be brought on simply to duplicate or replace the work that bona fide employees perform. 

Finally, it is worth emphasizing that the rules are different for non-profits and public sector employers. The DOL has taken the position that non-profits and public sector employers may use unpaid interns so long as the “intern volunteers without expectation of compensation.”

Marijuana Laws and the Workplace

By Sarah E. Stuart, Associate Attorney

Across the country, support is increasing for the legalized use of marijuana for both recreational and medical purposes.  Recreational use of marijuana is now legal in 11 states, and in 33 states, marijuana use for medical purposes is legal.  Although marijuana remains a Schedule I illegal substance under the federal Controlled Substances Act, its expanded availability under state law is changing the landscape for employers in developing policies and practices as to its use.

What should an employer do to ensure a safe, efficient, and compliant workplace considering these developments?  Because there is not a comprehensive answer for best practices, policies should be industry and state-specific. 

Overall, marijuana is still illegal under federal law, and, in the absence of state law specifically to the contrary, employers are not required to accommodate medical marijuana use while on the job.  Across the board, employers may (and should) require sobriety while at work. It is also reasonable to hold workers with safety-sensitive job positions to a higher standard than other employees. 

For employees outside of Tennessee, certain states will require reasonable accommodations be made for employees with a medical marijuana card or to permit employees to use marijuana recreationally outside of work.  If you have employees in a state where recreational and/or medical use is legal, it is important to be cognizant of any accompanying antidiscrimination statute or case law protecting users of marijuana from discrimination.  The employer’s approach to accommodations, drug testing, and limitations on use should correspond to each state’s laws. 

Even state antidiscrimination statutes often contain exemptions for jobs subject to federal regulations regarding drug use.  For example, the Department of Transportation Regulations requires drug and alcohol testing and prohibits on- or off-site marijuana use by transportation employees.  Federally regulated workplaces should be considered distinct from non-regulated workplaces in determining policies for use in states where some form of marijuana use is legalized.

To be clear, in Tennessee, marijuana remains illegal, both for medical and recreational purposes.  However, lawmakers have set forth a bill permitting medical cannabis in this state that, if the nationwide trend continues, could soon become law. 

One “hot” legal gray area when considering recreational or medicinal use of marijuana products is the use of CBD or CBD products.  In 2018, the federal Farm Bill modified the definition of legal industrial hemp to include cannabis sativa, provided the plant contains less than 0.3% tetrahydrocannabinoid, or THC (the intoxicating agent in most marijuana).  But this legality only applies to CBD lawfully derived from hemp grown under strict federal regulations applicable to hemp growers.  It is difficult, if not impossible, for either the employee or employer to trace where an employee’s CBD product originated or whether it contains more than 0.3% THC.  Thus, it is not apparent that CBD is legal under federal law and presents its own unique challenges.

Further complicating enforcing workplace drug policies is that it is difficult to gauge impairment due to THC.  The average supervisor or manager likely cannot recognize impairment from THC.  For workplaces with drug testing policies, oral fluid testing is most effective for demonstrating recent use of marijuana, or use within the past 24 hours.  Moreover, the levels of THC in average marijuana have drastically increased in the past 20 years, and there is no limitation in states where medical marijuana use is legal as to the amount of use that is permissible.

Because ever-changing marijuana laws vary broadly state-by-state, it is important to develop clear policies that take into account the changing landscape of its use.  It is important to tailor policies to individual states and to specific jobs, keeping workplace safety as a priority.  Should you have employees in states where marijuana is legal for medical or recreational use, or should you wish to provide guidance to employees on the use of CBD or other products, we can help you craft the necessary policy.

Leave Law Tip of the Month: Coordination of Leave

Lisa A. Krupicka, Attorney

There are so many different types of leave available to employees of medium to large-sized companies that it can be easy to get confused.  No company wants to deny its employees the leave to which they are entitled, but neither should sloppy administration of leave result in ambiguity about who can be off, for how long, and why.  This article discusses some tricky areas that can trip up even the most conscientious of employers.

  • Require substitution of paid leave.  The Family and Medical Leave Act (“FMLA”), allows employers to require employees to substitute paid leave such as vacation, sick leave or PTO for FMLA leave.  This does not extend the length of the leave, but rather renders a portion of it paid.  By requiring  substitution of paid leave, employers avoid a situation in which an employee is out 12 weeks for FMLA and then returns to work and immediately takes a two-week vacation.  Employers should be careful to follow their own rules when requiring employees to substitute paid leave:  If sick leave cannot be used to miss work for a sick child, then you can’t require an employee to use sick leave when she is on FMLA for the serious health condition of her child. 
  • Designate FMLA in a timely manner.  If an employee is injured on the job, he must be given worker’s compensation leave for the time he is unable to work.  Many employers offer short term disability paid leave for employees who are sick or injured regardless of whether it occurred on the job.  In both of these cases, it is almost guaranteed that the employee will also have a serious health condition that qualifies him for FMLA leave.   Do not drop the ball and fail to designate time off given to an employee for worker’s compensation or STD as also qualifying for FMLA.  The law frowns on after-the-fact designation of FMLA leave, so you do not want to be in a situation in which an employee is out six months with a worker’s comp injury but still has 12 weeks of FMLA to take for another reason.
  • FMLA designation is not the employee’s choice. Some employees who qualify for both FMLA leave and some sort of paid leave such as PTO or STD will ask that the employer not designate such leave as FMLA until the paid leave runs out.  The Wage & Hour Division recently issued an opinion letter saying that employers cannot make that option available.  If the circumstances justifying a leave are FMLA-qualifying, employers must designate the leave as FMLA even if the employee has other paid time off available:  “[O]nce an employee communicates a need to take leave for an FMLA-qualifying reason, neither the employee nor the employer may decline FMLA protection for that leave.”
  • How to address the withholding of information.  In some cases, employees determined to avoid using FMLA will simply refuse to provide the required medical certification and simply request the paid leave.  Not so fast.  Most forms of paid leave such as vacation and sick leave are not required by law to be offered by employers, so employees have no “right” to take paid time off.  Employers can and should tell employees in this situation that they are absent without leave until they turn in the proper medical certification.  In cases where an employee has been approved for worker’s comp or STD, you already know the employee is out for an FMLA-qualifying reason so no further information is required.