What Constitutes Unpaid Training
Unpaid training may take a variety of forms. Typically, it consists of job shadowing, observing employees, attending lectures, and/or assisting in other employees’ duties to develop their own skills. Such training varies enormously in its structure and rigor. For purposes of this blog, unpaid training will be defined as any education or training, formal or informal, offered to new hires for which the employer does not pay the employee anything or only pays minimum wage (or 2/3 of minimum wage) and which is mandated by an employer with no specific external educational institution or program. Unpaid training most commonly exists in vocations that do not require a formal license , such as retail, restaurant work, and most other common jobs. For example, unpaid training is common in the fast food restaurant industry. A person recently hired to work at McDonalds may receive a few hours of fast food management training from a supervisor with no formal food certification. If the new hire is instructed to shadow an employee for eight hours but she is actually put to work in the restaurant for the duration of her shift, we could argue that under the DLSE Order No. 4-2001 § 2(B), this person should be compensated for all hours worked.
Overview of California Labor Laws
California labor laws require employers to compensate employees for all "hours worked." While California allows employers and employees to agree that a voluntary unpaid internship should occur, employers must ensure internships meet the requirement of training and do not simply exist to fulfill the work requirements of the business. If the relationship is expressed as an internship but it otherwise meets the characterization of an employment relationship, California courts and the Department of Fair Employment and Housing (DFEH) will characterize the relationship as an employment arrangement and require the employer to pay the employee the required wages.
Exemptions to Unpaid Training Laws
Even in the face of California’s strict laws against unpaid internships, there are some exceptions to the prohibition on unpaid training. One such exception applies to non-profit organizations that provide vocational education or practical training about the industry in which the facility is being trained. These types of trainings are authorized under California labor law as long as a few conditions are satisfied: the training is in furtherance of a recognized vocation or profession; the training is such that the person being trained does not perform the usual tasks of the facility and instead performs no productive work; and the benefit of the training far exceeds the benefit of the employer. When these factors are satisfied, an unpaid volunteer may legally participate in vocational training or education. Employers who are nonprofit organizations with a clear educational purpose may also have some leeway with some of the limitations associated with unpaid training.
Effects of Unpaid Training
Although many employers hope that unpaid training will be temporary and lead to a dedicated and trained worker, the reality may be different. Employees may find that unpaid training is stretched too long or requires too much travel with limited job prospects for when the training is over. Even if they do not leave, workers may find that, for them, the significant amount of time spent learning the job without pay, has impacts their morale in spite of the eventual paycheck. Employees may also find that other opportunities arise that they must take advantage of because they simply cannot afford to help out while fully unpaid, leaving employers with a high turnover rate for those workers who initially seemed to dedicate themselves to stay on board. A crucial problem is that those who must work a second job during training often are not free to commit to regular, full-time work schedules because of their other positions, which can make it look like the workers are unreliable — even though the underlying problem is that they simply need the additional income.
Examples and Case Law
To gain a more practical understanding of how the law has been applied to unpaid training situations, it is helpful to review a couple of key cases.
Benningfield v. on Air Entertainment, Inc. (2002)
The facts of this case involved a company called On Air Entertainment, which owned and operated the largest chain of go-kart tracks in the nation. They required their employees to participate in a 20-hour training program which they were told would be paid. In actuality, the training was unpaid, but they were told if they completed the training and passed a test, they would be hired full time and paid. Because the company essentially used the initial training program as a recruitment tool (rather than a legitimate training program), the court decided that the employees deserved to be paid for both the training hours and the recruitment hours spent at the job. The idea is that there was no actual training, so the time the applicants spent at the company was not just doing "company training", but was actually spent recruiting applicants.
Mendiola v . CPS Security (2012)
This case involved a 2003 law passed called AB 1584, which limited the ability of security companies to put in law enforcement personnel in civilian locations. In response to this, CPS decided to recruit more heavily for on-the-job experience those people who had retired, enrolled, or were looking to enroll in local police training academies. Their goal was to ensure that a recruit had already reached a certain level of professionalism and aptitude. They claimed that they were only providing a hands-on version of the training an officer would have gotten in a formal setting. However, while many exposed themselves to great risk because they were not yet licensed, the court found that the recruits were crucial to the smooth and lawful daily functioning of the business. The court noted that the training the recruits received in the program was not so specialized that it would not easily dovetail with the training they received once hired. In any case, the instructor was not an employee of the company and was paid by the recruits. As a result, the court decided that the recruits were employees and owed full compensation for their time spent "on a job."
Strategies for Compliance
First and foremost, any training program that is offered to employees of a particular company must be structured, noted, and reviewed for compliance with employer compensation obligations. In addition, this review must occur before the training program begins. Moreover, the best approach is to encourage all employees to participate in post-lunch training offered on a voluntary basis, where employees are informed of the benefits of participation and are notified that participation is entirely voluntary, compensated or not. Such post-lunch sessions may also be more conducive to the retention of material, as well as to the enhancement of team building within the workplace. It is important to remember that whether an employee is actually engaged or developing skills in a training program (and thus should be paid) turns largely on the level of control the employer exerts over the employee during the training. Having the employee complete tasks for the employer during the training program, as opposed to working on independent practical duties that do not solely benefit the employer, is an indication that training is of little actual benefit to the student and merely serves the employer’s interest of saving on labor costs. The general rule of thumb is that if the training program mainly benefits the employer, the employer must offer compensation for the training time. Further, if the training involves demonstrating procedures that the employee will be performing regularly in the course of their employment, then the training is "on-the-job" to the employee’s position. It is possible for an employee to simultaneously benefit the company and learn new skills during training. This does not necessarily mean compliance problems will arise, so long as the primary benefit of the training belongs to the employee. However, the employer is likely to be tagged for a FLSA violation if the training consisted of shadowing or observing another employee and the trailing employee did not learn anything furthering their skill set or ability to perform their assigned job.
Closing Thoughts: The Legal Path to Unpaid Training
As we have seen, unpaid training and other programs that could be characterized as "internships" are legal, even in California, if certain conditions are met. In many cases, even if the interns are not paid, they may still be entitled to reimbursement for out of pocket expenses such as transportation and food.
As a general rule, when training is required by the employer, is part of continued employment, and provides no real benefit to the intern or has any real use outside of the company for future employment, there is a good argument that it is really work just like any of the workers’ other duties, and therefore should be treated like any other work-related task that must be paid under the law.
There may be some instances where unpaid "interns" can be allowed to come in while you give them on the job training . But firms that try to implement blanket policies that all "interns" or "trainees" will be unpaid will likely get into trouble eventually.
If you actually need to fill a position, they probably shouldn’t be unpaid, and you will likely end up having to pay them anyway. But if you can afford to have a unpaid "intern," and the "intern" is truly receiving educational benefit from the arrangement, then it may be possible to have an unpaid intern that won’t run afoul of Labor Code section 201.3, and/or the various forms of wage and hour claims for missed breaks, missed overtime, mis-classification and others.
Again, consult experienced employment counsel before proceeding with any arrangement which you may consider to be an unpaid internship or trainee program.