With summer just around the corner, employers are inundated with requests by students for summer internships. If your company offers such opportunities, taking a few moments to review the applicable regulations will help assure that the program complies with the law.

It goes without saying that a paid intern is an employee and subject to all applicable state and federal employment laws including those pertaining to minimum wage and overtime. Even if the internship is unpaid, failure to follow Department of Labor guidelines could lead to legal liability under the Fair Labor Standards Act.

Department of Labor Guidelines

The Fair Labor Standards Act (the FLSA) provides, of course, that individuals in an employment relationship must be paid for services performed. When is an unpaid intern an employee? According to guidelines published by the Department of Labor, if the following factors are met, there is no employment relationship and the intern need not be paid:

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 this intern;

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 all of these factors are met, the Department of Labor will conclude that an employment relationship does not exist under the FLSA. In such circumstances, minimum wage and overtime provisions do not apply to the intern.

Different rules apply for governmental agencies and non-profit organizations. Internships offered by governmental agencies, private non-profit food banks and non-profit organizations providing religious, charitable, civic, or humanitarian services are generally permissible so long as the intern volunteers his or her time freely and without anticipation of compensation.

A permissible unpaid internship will include some or all of these features:

  1. It is structured around a classroom experience as opposed to the employer’s actual operations;
  2. Academic credit is offered by a sponsoring institution;
  3. The internship provides the intern with skills that can be used in multiple employment settings as opposed to specific training in the employer’s operations;
  4. The intern does not perform the routine work of the employer;
  5. The employer is not dependent upon the work of the intern;
  6. Job shadowing opportunities that allow an intern to learn certain functions under the close and constant supervision of regular employees, but the intern performs no or minimal work.
  7. The internship is of a fixed duration established at the outset of the internship.

Factors which indicate an employment relationship (and trigger the requirement to pay wages) include:

  1. The intern is engaged in the operations of the employer;
  2. The intern is performing productive work such as, for example, filing, clerical work or assisting customers;
  3. The employer uses interns in lieu of hiring additional employees or offering more hours to existing employees;
  4. The intern receives the same level of supervision as other employees;
  5. The intern is offered employment to begin immediately upon the conclusion of the internship, effectively transforming the “internship” into a trial period of employment.

Summer internships, paid or unpaid, provide valuable experience to students. Employers need only exercise some caution is structuring the internship to avoid running afoul of DOL regulations. The DOL Fact Sheet on summer internships is available at http://www.dol.gov/whd/regs/compliance/whdfs71.htm

Published in AMM Blog
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