One of the telltale signs of summer is the influx of unpaid interns from high schools and universities.  Students volunteer to spend their summers performing various duties for companies in return for experience and training that otherwise would not be available to them.  Unfortunately, employers often inadvertently cross the line between bona fide internships and employment.  Those errors can result in significant liability for the unwary employer. 

One of the telltale signs of summer is the influx of unpaid interns from high schools and universities.  Students volunteer to spend their summers performing various duties for companies in return for experience and training that otherwise would not be available to them.  Unfortunately, employers often inadvertently cross the line between bona fide internships and employment.  Those errors can result in significant liability for the unwary employer.

In an April 2010 Fact Sheet, the Department of Labor took the position that internships in the “for-profit” private sector most often will be viewed as employment for which compensation will be due under the Fair Labor Standards Act.  A narrow exception exists, however, for interns who receive training for their own educational benefit, as long as the training meets certain criteria.  Specifically, the Department of Labor will find an internship exists (rather than an employment relationship) where:

  1. The internship, even though it includes actual operation of the facilities of the employer, is similar to training which would be given in an educational environment.
  2. The internship experience is for the benefit of the intern.
  3. The intern does not displace regular employees, but works under close supervision of existing staff.
  4. The employer that provides the training derives no immediate advantage from the activities of the intern; on occasion its operations may actually be impeded.
  5. The intern is not necessarily entitled to a job at the conclusion of the internship, and
  6. The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.
     

Taken together, these criteria make true “intern” status much more rare than many employers would believe.  Whenever an “intern” is performing productive work that would be performed by paid employees if the intern had not been hired, there is a significant risk that the purported “intern” will be found to be an employee who must be paid according to the minimum wage and overtime requirements of the FLSA.  Even if the intern has agreed otherwise, an employer who violates those FLSA requirements can be required to reimburse improperly designated interns for the time (and overtime) they spent on what was supposed to be an “unpaid” internship.

So before your interns arrive for the summer, review what it is that you intend to have them do, and make sure that the “intern” isn’t actually an employee that you have neglected to pay.