Ensuring Compliance with Interns

As the summer rolls around, many college students are looking for internships to fill their time. For students, internships are a great way to get real-world experience and build up their resumes to help them in their job search post-graduation. But internship programs can also be very beneficial for employers, who get to have young talent in the workplace, for less money. But beware, there are still laws and regulations surrounding the hiring and compensation of interns, and employers should be sure that they are compliant in order to avoid any legal repercussions.

There are many companies that have hired interns on an unpaid basis in order to save money on compensation that would otherwise go to entry-level employees. Companies sell these internship positions by portraying them as an invaluable experience that interns will want to have on their resumes, as they will be impressive to employers as these interns enter their full-time job search. However, hiring unpaid interns may actually violate some state and federal labor laws.

The U.S. Department of Labor (DOL) has a six-criteria test that determines whether an internship can be unpaid:

• The internship, even though it includes actual operation of the facilities of the employer, is similar to training which would be given in an educational environment;
• The internship experience is for the benefit of the intern;
• The intern does not displace regular employees, but works under close supervision of existing staff;
• The employer that provides the training derives no immediate advantage from the activities of the intern, and on occasion, its operations may actually be impeded;
• The intern is not necessarily entitled to a job at the conclusion of the internship; and
• The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

If these six criteria are met, the DOL asserts that an employment relationship does not exist under the Fair Labor Standards Act (FLSA) and the Act’s minimum wage and overtime provisions do not apply to the intern.

In general, internships that take a more educational approach, rather than an operational approach, are more likely to meet the criteria for an unpaid internship. Internships of this nature would provide the intern with skills that could be used in multiple employment settings, rather than just skills that are applicable to the specific employer. Internships that place the intern into a position that closely resembles that of a regular employee are less likely to qualify as unpaid internships.

As stated by the DOL, “If an employer uses interns as substitutes for regular workers or to augment its existing workforce during specific time periods, these interns should be paid at least the minimum wage and overtime compensation for hours worked over forty in a workweek. If the employer would have hired additional employees or required existing staff to work additional hours had the interns not performed the work, then the interns will be viewed as employees and entitled compensation under the FLSA.”

In addition, some local laws dictate that employees have the right to certain benefits, whether they are paid or unpaid. Employers should take the time to understand the local, state, and federal laws that apply to them and act accordingly to ensure compliance. More companies are beginning to examine their unpaid internship programs and realizing that they are not compliant, and are beginning to offer paid internships. When in doubt, it is best to classify interns as employees and pay properly under applicable federal, state, and local law.