Spring is here and retailers across the country are considering hiring summer interns in areas such as finance, communications, marketing, merchandising, production, and public relations. Internships serve a valuable training role for students interested in retail careers, and they provide an important recruiting vehicle for retailers. According to the National Retail Federation, retailers in the United States hired approximately 9,400 college students for internships and filled more than 2,000 full-time jobs with 2014 graduates last summer. However, as we reported in an October 2014 blog post, “Internships out of Fashion? Wage Lawsuits on the Rise in New York,” challenges to unpaid internships are one of the hottest wage and hour class and collective actions in vogue today, particularly in the fashion industry. Therefore, retailers should be careful to ensure that their internship programs meet wage and hour requirements. They also should consider taking other practical steps to prevent their mutually beneficial internship programs from turning into a source of legal liability. Below are three simple tips retailers should consider in order to avoid summer internship headaches.
Tip #1: Consider Paying Your Interns
Unless there is no doubt that the internship program is exempt under federal and state wage and hour laws, retailers should consider paying interns for their services at or above the minimum wage rate. The U.S. Department of Labor utilizes a six-factor test to determine if the intern is a trainee or an employee of a “for profit” employer. The six factors—all of which must be present in order to meet the unpaid internship test—as outlined in the Labor Department’s fact sheet, are:
- The internship, even though it includes actual operation of the facilities of the employer, is similar to training that 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 receives 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 intern understand the intern is not entitled to wages for the time spent in the internship.
Importantly, receipt of “college credit” is not a factor in determining whether an intern is a trainee or employee who is entitled to the protection of the federal wage and hour laws. It is also important to note that interns may not voluntarily agree to waive their rights to receive pay to which they might otherwise be entitled. Such voluntary waivers have long been illegal under both federal and state laws.
Therefore, employers must be certain that their unpaid internship programs meet all six factors of the Department of Labor’s test in order to avoid liability under the wage and hour laws. This is easier said than done when the exact parameters of the test are still in flux and where courts have disagreed over the application of federal wage and hour laws to internships. The Second Circuit Court of Appeals is poised to issue important decisions on the application of federal wage and hour laws to internships in two high profile cases involving the entertainment industry and media industry. However, these decisions may not be issued in time for the start of employers’ internship programs this summer.
It is also important for employers to remember that they must comply with state wage and hour laws, some of which are much more favorable to interns and make it very difficult for a for-profit employer to use interns without paying them. In Massachusetts, for example, only interns receiving training through a charitable, educational, or religious institution are exempt from the state wage and hour laws. This means that unpaid student volunteers working at for-profit employers who are not receiving academic credit for their internships through an accredited school are protected under the state wage and hour laws and must be paid the minimum wage and overtime if applicable.
Retailers that believe their internship programs meet the criteria for exclusion under the wage and hour laws should consult legal counsel to ensure that they are properly structuring and documenting these relationships. Some of the steps retailers should consider in this regard are the following:
- collaborating with educational institutions that are sponsoring the internships to explore how to ensure that interns receive the type of training they would receive in an academic environment;
- training supervisors on how to provide an internship experience that benefits the educational goals of interns, does not displace the work of regular employees, and does not require interns to perform administrative or other tasks that can be performed by regular employees; and
- properly documenting intern relationships, including start and end dates, the scope of the programs, and the fact that interns will not be paid and cannot expect a job at the end of the internship.
Tip #2: Comply With the Child Labor Laws
Federal and state minimum wage and overtime requirements are not the only wage and hour laws that can apply to internships. Retailers also should make sure they comply with federal and state child labor laws if they intend to utilize interns who are under 18 years of age. Federal and state laws can be very restrictive in terms of the hours of work minors can perform, and some states require employers to obtain proof of age documentation as well. Retailers should be sure to check these laws before their internship programs start to ensure their programs comply and that they obtain the necessary proof-of-age documentation from potential interns who are minors.
Tip #3: Pay Attention to Onboarding Your Interns
Just like seasonal workers, interns who are employees have the same legal protections as regular employees, which means they can sue you under federal and state employment laws in the same way that regular employees can. Even unpaid interns can bring legal claims—for example, a claim of sex discrimination under Title IX or claims under state common law—against an employer. Interns, as agents of employers, can also subject employers to employment and tort liability and, at a minimum, are sometimes in a position to impact customer satisfaction with retailers’ services. Therefore, retailers should keep these factors in mind as they are onboarding and training their summer interns. Some great tips on successful onboarding can be found in Kelly S. Hughes’s post, “'Tis the (Retail) Season, Part III: Five Tips for Hiring Seasonal Workers.”