U.S. Department of Labor Endorses More Flexible Unpaid Intern Test

Q.  Our company wants to establish an internship program and host student interns to work alongside our employees. Do we need to pay the interns?

A.  Possibly. Over the past few years, courts and the Department of Labor (“DOL”) have carefully examined the relationship between businesses and unpaid student interns to determine whether students working at a company are more properly classified as unpaid interns or employees protected by the Fair Labor Standards Act (“FLSA”).  Under the FLSA, if an individual is deemed a non-exempt employee, that employee must be paid at least a minimum of $7.25 per hour and one and a half times their regular rate of pay for all hours worked in excess of 40 in a workweek.  The minimum wage is higher in many states, including New York and New Jersey.

Previously, the Department of Labor required employers to meet a six-part test to prove that an individual was properly classified as an unpaid intern. One of the benchmarks employers were required to prove under the prior test was that the employer providing the internship opportunity “derives no immediate advantage from the activities of the intern . . . and on occasion its operations may actually be impeded.”

Citing four separate appellate court rulings that had rejected DOL’s six-part test, the DOL recently announced that it would use a more flexible “primary beneficiary” test in order to determine the “economic reality” of whether an individual is an intern or an employee. Going forward, the DOL will consider the following seven factors to determine whether an individual is an intern:

  1. The extent to which the intern and the employer clearly understand that there is no expectation of compensation. Any promise of compensation, express or implied, suggests that the intern is an employee—and vice versa.
  2. The extent to which the internship provides training that would be similar to that which would be given in an educational environment, including the clinical and other hands-on training provided by educational institutions.
  3. The extent to which the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit.
  4. The extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic calendar.
  5. The extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning.
  6. The extent to which the intern’s work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern.
  7. The extent to which the intern and the employer understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship.

No single factor described above is determinative and DOL cautions that whether an individual is properly classified as an unpaid intern will depend on the unique facts of any particular case.  Employers should also be aware that some states have their own test for determining whether an intern must be paid. For example, the New York Department of Labor lists eleven separate factors relevant to determining whether an unpaid intern should be considered an employee under New York law.

Before establishing an internship program or allowing a student to intern at a business, companies should examine the “economic reality” of their relationship with interns, review the new DOL Fact Sheet on interns, and consult with a qualified employment lawyer to ensure that the internship program complies with both federal and state wage and hour laws.

Lee E. Tankle

Job Ads Distributed to Younger Recruits May Be Discriminatory

Q.  My company wants to target on-line recruitment ads for certain jobs to specific age groups. Is that legal?

A.  In most circumstances, the answer is no. Unless an employee’s age is a bona fide occupational qualification (i.e., hiring an applicant under a certain age is reasonably related to an essential operation of the business), a policy targeting recruits under an age limit likely will be considered age discrimination.

The Age Discrimination in Employment Act (ADEA) states that, generally, it is unlawful for employment notices or advertisements to include age preferences, limitations, or specifications.  Thus, advertisements that state that the company is seeking applicants who are “age 25 to 35” or “recent college graduates,” for example, violate the ADEA. Employers also may not base hiring decisions on stereotypes about a person because of his or her age.  Likewise, an employer may not use an employment test that excludes older applicants unless the test is based on reasonable factors other than age.

But, what if, instead of soliciting a certain age group in the text of the advertisement, the company uses technology, such as micro-targeting, to limit the population receiving the job ad? In a recent class action case filed in Northern California, a group of plaintiffs claimed that such a practice also violated ADEA. The plaintiffs sued several large companies and a defendant class of “hundreds of major American employers and employment agencies,” claiming that the companies used Facebook’s ad platform to routinely exclude older workers from receiving their recruiting ads on Facebook, “thus denying older workers job opportunities.”  The lawsuit seeks to certify a class of older applicants who were excluded from receiving employment ads, and seeks injunctive and monetary relief for what it calls a pattern and practice of age discrimination.

The class action is in the early stages, and it will be interesting to see whether the court agrees with plaintiffs’ argument that using technology to limit the pool of applicants to certain age groups is discriminatory.  In the meantime, employers should take heed and avoid targeting younger recruits, both on the face of the job ads and by limiting the population receiving them, absent a bona fide occupational reason to do so.

–Tracey E. Diamond

LinkedIn Activity May Violate Non-Solicitation Agreements

Q: A former employee has invited some of her former co-workers and clients to connect on LinkedIn. Is this a violation of her non-solicitation agreement with our company?

A: It depends. In general, a generic invitation to connect will not be viewed as a violation of a non-solicitation agreement.  However, if an invitation is accompanied by a personalized message or other targeted communication, it likely will be viewed as a violation.

In recent years, non-solicitation allegations have increasingly centered around the use of social media, and most prominently, LinkedIn. Employees argue that LinkedIn invitations are simply a way to keep in touch and maintain their professional networks.  In contrast, employers argue that LinkedIn invitations are an easy way for employees to solicit former colleagues and clients under the guise of connecting on a social network.  After the connection is made, the former colleague or client can see job postings and other information about the employee’s new place of work.  Employers contend that this is no different than an employee calling a former colleague and soliciting them to apply for a position, or calling a former client to solicit business.

In Bankers Life and Casualty Company v. American Senior Benefits, a recent case before the Appellate Court of Illinois, the court sided with the employee.  There, the employer alleged that a former employee’s invitations to three former colleagues to connect on LinkedIn violated his non-solicitation agreement.  The employer argued that, after connecting, the employees could view their colleague’s  profile, which had job listings at his new employer.  The court disagreed, holding that there was no violation of the non-solicitation agreement because the invitations to connect were generic and contained no discussion of either employer.  Additionally, the former employee did not suggest that his former coworkers view job postings at his new job or leave their employment with the company.  The court noted that if the employees accepted the connection, their next steps, which may have included viewing job postings on the new employer’s website page, were not actions for which the former employee could be held responsible.

By contrast, in Mobile Mini, Incorporated v. Citi-Cargo, a Minnesota District Court case, after resigning from her position as a regional sales representative for Mobile Mini, a former employee updated her LinkedIn profile to reflect her new position with a competitor, and posted an update describing her new employer’s business and inviting people to call her for a quote.  The court granted a preliminary injunction, holding that the employee’s postings were not, as the employee claimed, mere status updates announcing the employee’s new position and contact information, but rather were “blatant sales pitches” that were meant to “entice members of [the employee]’s network to call her for the purpose of making sales in her new position at Citi-Cargo.”  The court noted that, had the posts simply announced the employee’s new position and contact information, it was unlikely there would have been a breach.

As the cases above demonstrate, employers who want to enforce their former employees’ non-solicitation agreements should be on the lookout for employee social media activity that amounts to a sales pitch or enticement. However, a former employee who simply announces her new position and provides contact information likely will not be considered to have breached the agreement.

Pepper lawyers have seen a significant increase in both threatened and filed lawsuits relating to non-compete and non-solicitation agreements in the past year. Many of these agreements have imprecise language, which results in confusion on the part of the employee, former employer and new employer as to what kind of action constitutes solicitation, and often leads to disputes about the scope and enforceability of the provisions.  It is essential for employers to ensure they have clearly drafted non-solicitation and non-competition agreements so it can easily be determined whether a particular action violates the agreement.

Jessica X.Y. Rothenberg


Important Additions to NYC’s Fair Chance Act Limit Employers’ Ability to Perform Background Checks

Q: What do I need to know about the recent additions to New York City’s law about the use of criminal history in employment decisions?

A: While the New York City Fair Chance Act (“FCA”) has been in effect since October 2015, the New York City Commission on Human Rights (“Commission”) recently enacted final rules, which clarify many aspects of the law.  The final rules went into effect on August 5, 2017.

The key provision of the FCA prohibits employers from inquiring about an applicant’s criminal history until after a conditional offer of employment has been made. The final rules explain the meaning of a conditional offer, and clarify the steps an employer must take before revoking a conditional offer or taking an adverse employment action.

A conditional offer is defined as an offer of employment, promotion, or transfer. It is essential for employers and all relevant decision makers to understand that the FCA’s provisions cover far more than just an initial offer of employment – they also cover promotions and transfers.  The FCA provides that a conditional offer can only be revoked based on one of the following:

  • The results of a criminal background check (in which case the “Fair Chance Process” must be followed); or
  • The results of a medical exam, as permitted by the American with Disabilities Act; or

Other material information the employer could not have reasonably known before making the conditional offer if, based on the material information, the employer would not have made the offer.If an employer wishes to rescind a conditional offer based on a criminal background check, the employer must follow the “Fair Chance Process,” which is described in section 8-107(11-a) of the New York City Administrative Code. This includes providing the applicant with a copy of the background check report and an analysis of the factors that went into the decision (the list of acceptable factors is in Article 23-A of the New York State Correction Law), and allowing the applicant to address the criminal history at issue before the offer is rescinded. A sample notice approved by the Commission is available here:


The final rules also added a number of per se violations. Engaging in such action is considered a violation regardless of whether the employer takes an adverse action against an employee. Fines for per se violations range from $500 to $10,000, depending on the facts and whether the employer has previous FCA violations. Per se violations include making any inquiry or statement about an applicant’s criminal history before a conditional offer is made, and using applications that require applicants to consent to a background check and/or provide information about criminal history. The use of such applications is a violation even if the application contains a disclaimer that states New York City applicants should not answer certain questions. This prohibition is quite unusual and runs counter to many employers’ practices of using nationwide or multi-state employment applications.To ensure FCA compliance, employers should review their existing policies and practices, and ensure key personnel are up to date with the FCA requirements. Employers should consult a labor and employment law attorney with any questions.

— Jessica Rothenberg

Zero Tolerance Drug Testing Policies in the Age of Medical Marijuana

Q:  My Company wants to institute a drug testing policy that would automatically disqualify an applicant for employment if they test positive for illegal drugs, including medically-prescribed marijuana. Is this legal?

A.  The law regarding the responsibility of employers to accommodate medical marijuana use continues to evolve as more states pass laws allowing for marijuana use for medical and recreational reasons. In Pennsylvania, for example, the law is silent as to whether an employer can rely upon a positive drug test as a reason to reject the applicant for employment. However, the statute lists specific areas in which employers may prohibit employees from working while under the influence of marijuana – operating or controlling government-controlled chemicals or high-voltage electricity, performing duties at heights or in confined spaces; and performing tasks that threaten the life of the employee or his/her coworkers.  By implication, outside these specified areas, employers may be required to accommodate marijuana use, so long as it does not occur at work.

In New York, the law goes even further, providing that certified patients shall not be subjected to “disciplinary action by a business” for exercising their rights to use medical marijuana. A patient with a prescription for medical marijuana in New York State is considered to have a “disability” under the New York State Human Rights Law.  This means that New York employers must provide reasonable accommodations to employees or prospective employees who are certified to use marijuana for medical reasons.

The Massachusetts Supreme Judicial Court recently ruled that employers may be held liable for disability discrimination under Massachusetts state law if they fire an individual for using medical marijuana. In that case, the employee was fired after her first day of work for failing a drug test, despite the fact that the employee had informed the company that her doctor has prescribed marijuana as a way to manage her Crohn’s disease.  The court held that using medical marijuana is as lawful as using any other prescription medicine, despite the fact that it is illegal under federal law.  Further, the court stated that it would be a reasonable accommodation for an employer to allow its employees to use medically-prescribed marijuana away from the employer’s place of business unless the employer can show undue hardship.

It is quite possible that the growing number of states that have enacted medical marijuana legislation will follow the lead of the New York legislature and the Massachusetts court in adding medical marijuana use – at least outside of the workplace – to the list of accommodations that are considered to be reasonable. That means that employers will not be able to rely on positive drug test results for marijuana for employees working in non-safety-related positions without engaging in the interactive process with the employee or applicant.  The employer will have to analyze whether the employee’s use of marijuana outside of working hours will prevent the employee from performing the essential functions of his or her job.  Moreover, the employer will want to monitor the employee to ensure that the accommodation does not impact the employee’s job performance.

– Tracey E. Diamond