You’ve worked hard to set up your business, and feel you have a lot you can teach up and coming young talent. For many business owners offering internships, especially for the summer, seems like a win-win. You get some temporary help during a time many employees take vacations, and you also get to mentor and foster someone who may become a permanent member of the team. While both you and your intern have a lot to offer each other, it is critically important the nature and scope of the relationship is valid and legal to avoid potential unwanted and unnecessary litigation down the road.
If you pay your interns during the time they train with you there is generally less potential for litigation down the road. However, not every business can afford to pay summer or temporary help, especially when training costs and productivity loss are factored in. The temptation to not pay interns is therefore high, but laws exist to protect intern and trainee workers from being exploited. Recently, there has been a significant increase in lawsuits filed by upset interns seeking back pay and even penalties and interest. These suits are filed under the Fair Labor Standards Act (FLSA). Just like full time and part time employees, temporary workers like interns and other seasonal positions are covered by the FLSA. The law mandates minimum pay for such workers unless six criteria are met. Therefore, if you decide an unpaid internship works best for your company and for the position, make sure to consider the following standards set forth by the U.S. Department of Labor to help ensure your intern cannot come back to haunt you.
1. The training is similar to what would be given in a vocational school or academic educational instruction
The Department of Labor (DOL) looks at two main considerations in this area. The first is whether the training the intern receives is similar to a classroom or academy, and not simply for the employer’s “actual operations”. The second consideration piggy-backs off the first: the more generally applicable the skills learned, the more likely the intern is an exempt trainee. The DOL specifically says if the workers are engaged in the “primary operations of the employer” and “performing productive work”, such as helping customers, clerical work, or filing, that may be sufficient to classify them as an employee and thus require payment for their services.
2. The training is for the benefit of the trainees;
This category is so straightforward the DOL does not elaborate. Your program needs to benefit your trainees, not yourself or your business. Therefore, if you want a tax write off for training purposes or costs, or generally will receive a greater benefit from the internship than your trainee, the DOL will classify them as an employee and require minimum payments for their services.
3. The trainees do not displace regular employees, but work under their close observation.
An unpaid intern cannot displace an employee. Therefore, if you take on an intern for a role filled by another employee during the employee’s absence (such as vacation or maternity leave), you cannot properly classify the trainee as an unpaid intern. The DOL will also look to whether the work performed by the intern saved the employer from having to pay overtime to their employees, or if the intern was hired in lieu of a paid employee. Finally, the more work the trainee does and the more closely supervised the trainee is, the more likely the trainee must be classified as an employee.
4. The employer that provides the training derives no immediate advantage from the activities of the trainees.
The DOL does not provide specific guidance in this area, but the gist of the criterion is clear. If you take on a summer intern that provides immediate advantages to your business, such as excellent tech support skills or other unique attributes aside from merely increasing manpower, the trainee will likely be deemed an employee rather than an intern.
5. The trainees are not necessarily entitled to a job at the conclusion of the training period.
While the possibility of future employment can be a tempting “hook” to get good candidates, it is important to refrain from alluding to such possibilities. The DOL will consider any pre-employment consultations when determining the trainee’s status, and the DOL will also find the expectations of both the trainee and the employer relevant to the inquiry.
6. The employer and the trainees understand that the trainees are not entitled to wages for the time spent in training.
This must be done prior to taking on your trainee. Furthermore, it is advisable to have this condition of training in writing, preferably with opportunity to consult counsel if desired. Additionally, because of laws governing the capacity of minors to enter into binding contracts, it is also advisable to not hire individuals younger than 18 years old as trainees.
Summer internship programs are an excellent way to give back to your community and foster young talent. It is preferable to pay your interns if you can to protect yourself from possible future litigation. If you cannot or do not desire to pay your interns, it may be best to forgo an intern program until you can afford to do so. If you wish to begin or continue an unpaid internship program, be sure it conforms with the Department of Labor’s criteria under the Fair Labor Standards Act. More information may be found at http://www.dol.gov/whd/.
Patrick R. Norris, J.D., Norris Legal, L.L.C.
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