Unpaid summer internships have seemingly always provided mutual benefit to both employers and interns.  Interns have the opportunity to gain experience, build relationships, and learn about a particular career or industry in a “real world” setting, and employers gain support, albeit unskilled, from an enthusiastic worker.

However, the legality of the internship relationship is subject to increasing scrutiny. In 2010 the Department of Labor (DOL) set forth new guidance to help determine whether interns must be paid minimum wage and overtime under the Fair Labor Standards Act (FLSA) for the services provided to “for-profit” private sector employers. Since the introduction of the DOL’s guidance there has undoubtedly been a surge in wage and hour lawsuits filed on behalf of unpaid interns to seek wages. The Charlie Rose show has reportedly settled for $250,000 in back wages to 189 interns. Notably, the emerging trend in litigation is not limited to unpaid interns. In New York, a former Intern/Assistant Football Coach filed suit against Hamilton College’s Athletics Department alleging that he was paid the same monthly stipend regardless of the number of hours he worked, in violation of the FLSA’s minimum wage and overtime requirements. The plaintiff is representing a class of forty former interns, and is seeking unpaid overtime wages, liquidated damages, interest, and attorneys’ fees.

The potential costs of internship litigation are daunting; however, internships are still a valuable resource for employers and interns. Accordingly, employers should structure their internship programs to comply with DOL guidance. Pre-planning is critical. Questions regarding the applicability of the FLSA’s minimum wage and overtime requirements should be assessed using the DOL’s promulgated criteria. A private sector employer should be able to answer the following questions before classifying an internship as exempt from FLSA wage and hour requirements:

  • Is the employment experience primarily for the benefit of the intern and not the employer?
  • Is the internship comparable to training offered in an educational environment?
  • Does the intern displace a regular employee?
  • Does the intern work closely under close supervision of existing staff?
  • Is the intern not necessarily entitled to a job at the conclusion of the internship?
  • Does the employer derive immediate advantage from the activities of the intern?
  • Does the employer make clear to the intern, from the outset, that the internship is unpaid?

After an employer makes a final determination regarding the classification of the internship, it may be helpful to take some additional steps. Before hiring any interns, employers may want to consult legal counsel to draft a written agreement setting forth the goals, duties, and objectives of the internship program. The agreement should explicitly outline any compensation or academic credit that will be awarded. Employers should keep diligent records of the internship program, including time records of interns. If an employer has an existing internship program, it may want to hire legal counsel to conduct an audit of the program to determine compliance with the FLSA. Further, it may be helpful to train the supervising staff regarding the roles of interns. Ultimately, employers should be diligent in their creation and execution of internship programs to minimize liability.