Could Your Company’s Unpaid Internship Program Land It in Legal Trouble?

By Leslie Austin / March 24, 2015 / Uncategorized No Comments

Summer is fast approaching and with it prime internship season. If your company has an internship program in place, is planning to start one or just wants to test the waters by hiring one intern for the summer, now is the time to review or make plans for managing your interns and ensuring their time with your organization is mutually beneficial.

One of the biggest challenges in planning to hire an intern is deciding whether to pay — and if so, how much. To make this decision, you need to consider federal and state employment laws and understand that if you choose to offer an unpaid internship you could face a lawsuit down the road.

In recent years there have been several high-profile cases where interns have sued employers for not paying them for their work in violation of labor law, including lawsuits against “the makers of the movie Black Swan” and magazine publisher Condé Nast. And these cases have caught the attention of DOL officials and young adults who are more attuned to their rights as interns.

The DOL Test for Unpaid Interns

The U.S. Department of Labor has a six-point test employers can use to determine whether the internship they’re offering can be unpaid:

1. 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;
2. The internship experience is for the benefit of the intern;
3. The intern does not displace regular employees, but works under close supervision of existing staff;
4. 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;
5. The intern is not necessarily entitled to a job at the conclusion of the internship; and
6. The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

Employers must satisfy all of these stipulations to legally offer an unpaid internship. Simply put, interns are trainees, not free labor. If they are performing productive work that benefits the employer  — filing, doing clerical work or assisting customers — they must be paid.

Preparation is Key

Whether you pay your interns or not, it’s important to prepare yourself to provide them with proper training, guidance and supervision. Structure every internship like a college course: set goals and objectives, come up with a schedule, identify those who will train and mentor the intern, and provide feedback. Assign projects to interns upon which they’ll be evaluated. Making a plan well in advance of bringing interns on board may make it clearer to you whether you need to pay them, or whether it’s more of a training situation.

Remember, if you’re not going to pay your interns, the skills they learn at your company must be educational and transferrable, and not just specific to your organization. And unpaid interns will likely spend more time shadowing and observing employees than performing productive work.

Paying interns — even if it’s just minimum wage — not only means you can have them perform work tasks for the company, it raises the company’s stature as an employer of choice. In addition, when it comes to paying people, it’s important to remember that you often get what you pay for.

Internships can be valuable, mutually beneficial experiences for both interns and employers. With the high-profile lawsuits in the news recently, however, the DOL will likely be looking at internships a little more closely, and so it’s vital that you get them right.

Want to learn more about how to structure your company’s internships? Contact us.

HR Solutions is a human resources outsourcing firm based in Baton Rouge, Louisiana. We eliminate human resources headaches for businesses with 10 to 1,000 employees by handling their payroll, employee benefits, regulatory compliance and other staffing needs. Contact us to learn how we can streamline your company’s human resources function to save money and reduce risk.

---