In today’s Advisor, we receive expert guidance on internships from BLR Legal Editor, Susan Prince, in an article that first appeared on HR.BLR.com®.
It’s that time of year again. The trees begin to bud, the chill finally leaves the air, peoples’ moods seem to lift … and we consider whether we need to pay our summer interns. Particularly in times when employers have decreased their hiring numbers, summer interns are an attractive option at little or no pay. Interns cost much less than new hires, and employers don’t have to provide interns with benefits.
Summer interns often get a bad reputation, but the majority of respondents to a BLR HR Poll regarding internships last summer stated that they had a positive experience with their interns. While 37 percent of poll respondents did not hire summer interns in 2014, those who did had a good experience by a wide margin (52 percent). Only 4 percent indicated that there were problems with productivity, attendance, or workplace skills. Interesting to note was that our intern poll results from two summers ago (2013) shows 35 percent of respondents were not hiring interns, while three summers ago (2012) results showed only 26 percent did not have interns that summer.
Internship programs can provide advantages for both employers and interns, but many internships risk running afoul of state and federal laws. Employers can end up on the hook for significant amounts in unpaid wages, employment taxes, and penalties.
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To avoid these unintended consequences, make sure your program:
- Is similar to training that would be provided in an educational environment
- Predominantly benefits the interns
- Provides interns with skills they can use in multiple employment settings rather than only in the employer’s operation
- Ensures interns do not perform the routine work of the business on a regular and recurring basis
- Does not result in the displacement of regular employees
- Does not merely augment the existing workforce during specific time periods
- Puts interns under the close supervision of existing staff
- Provides no immediate advantage to the employer from the interns’ activities
- Impedes the employer’s operations on occasion
- Runs for a fixed length of time, established before the internships begin
- Does not entitle interns to employment after their internships conclude
- Makes clear to interns that they are not entitled to wages for their time during the internships
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.
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.
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The federal Department of Labor reminds us that the Fair Labor Standards Act (FLSA) defines “employ” very broadly as including to “suffer or permit to work.” Covered and nonexempt individuals who are “suffered or permitted” to work must be compensated under the law for the services they perform for an employer. Interns in the for-profit private sector who qualify as employees rather than interns typically must be paid at least the minimum wage and overtime compensation. Heed this reminder from the DOL, and keep them from knocking at your company’s door at the end of the summer.