Depending upon your type of business, student interns can be a big benefit. They can often provide needed help with research or with developing and implementing new programs, products or services. Beyond whatever assistance an intern may be able to provide, an internship can also provide business people with the sense of satisfaction that comes from helping the intern gain knowledge and learn new skills.
Due to recent economic conditions, younger people are finding fewer job prospects and tougher competition for the smaller number of jobs that do exist. As a result, more and more recent graduates and “near-grads” are seeking unpaid internships in the “for-profit” sector to gain additional skills, experience and contacts. Employers, however, need to be cautious before inviting interns to join their businesses.
The U.S. Department of Labor has announced that it is stepping up enforcement against what it views as the excessive and improper use of unpaid interns by businesses for free labor. Under guidance issued by the Department earlier this year, if an internship is structured to be an extension of the intern’s academic experience, and provides the intern with skills that can be used in a variety of settings, then the program will not likely run afoul of federal wage and hour laws. If, on the other hand, the intern is engaged in the operations of the business or performing productive work (such as filing, clerical work, or assisting customers), then he or she may not be exempt from federal minimum wage and overtime requirements.
The Department has developed six factors that employers must use to determine whether an internship complies with federal hour and wage laws. If any of the following factors is not met, the intern must be paid a minimum wage and, as applicable, overtime pay:
● The intern should not displace regular paid workers and should work under close supervision.
● The training that the intern receives should be similar to what would be given in an academic setting.
● The internship should be for the benefit of the intern.
● The employer should not gain immediate advantage from the activities of the intern, and on occasion, the employer’s operations may actually be impeded.
● The intern should not be guaranteed a job at the conclusion of the internship. In other words, the internship should not be used as a trial period for persons seeking employment.
● Both the intern and the employer should understand that the intern is not entitled to wages for the time spent during the internship.
If all these factors are met, the intern will be considered a “trainee” and not an employee under federal law. If one or more of these factors is not met, the business could be obligated to pay back wages, workers’ compensation and unemployment insurance benefits, and could also be subject to federal and state discrimination laws, back tax liability, fines and significant legal bills. Employers should therefore be careful to structure any existing or future unpaid internship programs to make sure that they comply with the above factors in order to avoid legal liability.
The Lawson Firm, LLC (“TLF”) is a law firm providing legal counsel and value-added legal services to employers. We focus on preventative strategies to help employers avoid violations, minimize disputes, and promote positive and productive work environments. Further information about TLF may be found at www.lawsonfirm.net. This article is intended to provide general information only and is not intended to provide solutions to individual problems. Readers are cautioned not to attempt to solve individual problems solely on the basis of information contained in the article. TLF does not claim expertise in the laws of jurisdictions other than those in which our attorneys are licensed.