It is that time of year again – summer internship season. With the downturn in the economy in 2007 and 2008, an increasing number of employers started using internships as a way to complete work and recruit potential future employees without increasing employee headcount. At the same time, swarms of college and graduate students began looking for opportunities to gain work experience and credentials for their résumés, and, in exchange, many were more than willing to work for free. It sounds like a win-win situation, but unless an internship meets the Department of Labor’s (DOL) requirements for a training program, a for-profit, private sector employer1 might be setting itself up for a future of legal headaches.

Recent headline-grabbing lawsuits brought by former interns against the Charlie Rose Show, Fox Searchlight Pictures and the Hearst Corporation illustrate the pitfalls of managing an internship program – particularly where interns are working long hours and sometimes doing what appear to be menial tasks. The increasing number of intern lawsuits has not gone unnoticed by plaintiffs’ attorneys, who have established websites and blogs inviting interns to share their experiences and receive a free analysis of their legal status. In addition, the DOL has indicated that the internship proliferation has caught its attention and will be the subject of enforcement actions and audits where appropriate. Employers who choose to hire interns can decrease their risk and potential exposure by ensuring that their programs meet the six-part DOL test for a training program.

The DOL begins its analysis with the Fair Labor Standards Act (FLSA), which broadly defines "employ" as "suffer or permit to work." As a result, interns in the for-profit private sector most often will be found to be employees, who in turn are entitled to minimum wage and overtimeunless they meet the requirements for trainees. Do your interns meet these criteria?

  • The internship is similar to training that would be provided at an educational institution. (This can be accomplished with a college providing oversight and educational credit. In addition, employers should avoid having interns perform administrative tasks, such as filing, where it would be difficult to argue that the intern is receiving an educational benefit from the work experience).
  • The experience is for the benefit of the intern.
  • The intern does not displace a regular employee. If the employer would have hired another employee but for the intern, the intern is likely an employee.
  • The employer derives no immediate advantage from the internship and is occasionally impeded.
  • The intern is not entitled to a job at the end of the internship, which is of a fixed duration. Using internships in the place of probationary periods for a potential new employee is impermissible.
  • Both the employer and the intern understand that no wages will be paid.

Failure to meet these requirements can result in a whole host of legal problems starting with individual or collective actions for unpaid wages and overtime. Moreover, an employer may face additional liability for unpaid taxes, unemployment compensation, employee benefits, workers’ compensation and other claims brought under the applicable state’s laws. Taking proactive steps before hiring interns can turn an uncertain situation into a win-win for all involved.