Unpaid internships are viewed universally as great opportunities for students to acquire valuable job skills and experience. In fact, experiential learning opportunities provide students with a leg-up on those competing for jobs right out of college.
However, warns Evelyn Gentry, Faegre Baker Daniels LLP, there are downsides for employers that use unpaid interns, the most notable being potential violations of the FLSA.
Misclassifying employees as unpaid interns, and thereby denying them federal minimum wage and overtime wages can result in costly litigation, civil fines, or both. Furthermore, employers who willfully violate the wage payment provisions of the FLSA may be subject to criminal prosecution.
Because so much can ride on the proper classification of workers as unpaid interns, it is imperative that employers design and implement internship programs in a manner that complies with the Department of Labor’s (DOL) guidelines on internship programs. Among other things, a properly structured unpaid internship program will:
- Provide training similar to that which would be given in an educational environment and which is primarily for the benefit of the intern;
- Provide the intern with close and constant supervision by regular employees; and
- Make sure the intern understands the internship is unpaid and that there is no guarantee of regular employment at the conclusion of the internship.
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Employers must be proactive and thorough to ensure compliance with the FLSA and the DOL guidelines. The steps employers can take to ensure proper classification of unpaid interns include:
- Working with educational institutions to ensure that the internship is academically oriented for the benefit of students;
- Making sure interns do not perform the tasks that regular employees would normally perform; and
- Putting the terms of the unpaid internship in writing such that the intern acknowledges the internship is unpaid and that he or she is not guaranteed regular employment.
Taking each of these steps and others may protect employers from liability for FLSA violations arising out of internship programs.
Is Intern Training, Working or Both?
Let’s flesh out the difference in more detail. Determining whether an intern should be unpaid or paid is based on whether the intern is training or working or doing both.
In general, the more an internship program is structured around a classroom or academic experience as opposed to the employer’s actual operations, the more likely the internship will be viewed as an extension of the individual’s educational experience (this often occurs where a college or university exercises oversight over the internship program and provides educational credit).
The more the internship provides the individual with skills that can be used in multiple employment settings, as opposed to skills particular to one employer’s operation, the more likely the intern would be viewed as receiving training. Under these circumstances, the intern does not perform the routine work of the business on a regular and recurring basis, and the business is not dependent on the work of the intern.
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On the other hand, if the interns are engaged in the operations of the employer or are performing productive work (for example, filing, performing other clerical work, or assisting customers), even though they may receive some benefits in the form of a new skill or improved work habits, an employment relationship may still exist because the employer also benefits from the interns’ work. In such a case, intern pay is required.
If an employer uses interns as substitutes for regular workers or to augment its existing workforce during specific periods, these interns must be paid at least the minimum wage and overtime. If the employer would have hired additional employees or required existing staff to work additional hours had the interns not performed the work, the interns will be viewed as employees.
Conversely, if the employer is providing job shadowing opportunities that allow an intern to learn certain functions under the close and constant supervision of regular employees and the intern performs no or minimal work, the activity is more likely to be viewed as a bona fide educational experience. If the intern receives the same level of supervision as the employer’s regular workforce, this would suggest an employment relationship, rather than training.
An unpaid internship should be of a fixed duration, established before the outset of the internship. Further, unpaid internships generally should not be used by the employer as a trial period for individuals seeking employment at the conclusion of the internship period. If an intern is placed with the employer for a trial period with the expectation that he or she will then be hired on a permanent basis, that individual generally would be considered an employee under the FLSA.
In tomorrow’s Advisor, a Department of Labor test for classifying internships as unpaid, plus some great news—you can receive a whole HR Library of online training to help with employment decisions.