Published in the May 2015 Chamber Review – the Concord (NH) Chamber of Commerce’s monthly newsletter
It is that time of the year again when companies take on college students as summer interns or “volunteers.” There is no doubt that internships can be invaluable to college students in terms of the subject matter and practical experience of working in a real world environment that may lead to a job offer. However, many companies mistakenly believe that they do not have to pay wages to these interns. In fact, there is no “internship” exemption from federal wage and hour law. Most of the time interns will be considered non-exempt employees and therefore must be paid at least minimum wage for all hours worked, including overtime for any time worked over 40 hours in a work week pursuant to the Fair Labor Standards Act (FLSA).
There are limited circumstances when an individual in an internship or training program would not be considered an employee and thereby not be compensated for time spent performing services for the company. Interns who receive training for their own benefit from a company must meet the following six criteria in order to meet this exclusion:
- 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.
It may appear fairly easy to meet the six criteria, but in fact many well-known companies have been recently alleged to have violated the FLSA “training” rule. Failing to meet the “training” requirements can result in an action for unpaid wages and overtime, attorney’s fees, employer liability for unpaid taxes, unemployment contribution back payment, and worker’s compensation claims.
To ensure that compliance is met, focus on understanding and implementing the internship as an educational program. For example, provide generalized training that will not result in an immediate advantage to the business. Keep track of the substance of the training, length of training and who conducted the training and, similarly, keep track of mentoring. If interns are following a true educational program then it only follows that they will need close supervision. Supervisors should keep track of the type and frequency of that supervision. Unpaid interns should not be performing the same tasks as current employees nor displacing current employees. The company should not receive an “immediate advantage” from the activities of the unpaid intern. For example, if the company charges a customer for work performed by the unpaid intern, then this arrangement could tip the scales in the direction of the unpaid intern being considered an employee. In terms of the nuts and bolts of the internship, establish a definite time period for the internship to begin and end, confirm in writing that no job is promised at the end and that it will be unpaid. Finally, unpaid internships arranged through educational institutions and that are appropriately documented as described, are less likely to be found to be in violation.
Remember that the USDOL will analyze each internship on a case-by-case basis and if you have any hesitation about whether the intern meets the criteria the simple answer is to pay him or her.
Beth Deragon is an attorney in the Employment Law Practice and Litigation Group at the law firm of McLane, Graf, Raulerson & Middleton. Beth can be reached at email@example.com or at (603) 628-1490. She also contributes regularly to www.employmentlawbusinessguide.com.