As summer approaches, many organizations are preparing to hire summer interns. And while internships are typically viewed as a way for college students to gain experience and companies to benefit from their assistance, many questions focused on compensation and harassment arise surrounding their hiring. Let's take a look at the issues that may arise. 

The primary issue employers face with respect to interns is whether an intern is entitled to either minimum wage or even overtime compensation. The Fair Labor Standards Act (FLSA), the federal law governing overtime and minimum wage, rules apply only to “employees” but, unfortunately, the FLSA's definitions are vague in determining whether “interns” are, in fact, employees. The Act simply defines an “employee” as “any individual employed by an employer.” Due to this ambiguity, the Department of Labor (DOL) has interpreted the language of the FLSA to carve out a six-factor test for determining when interns must be paid federal minimum wage and overtime. All six factors must be met for the intern to be exempt from the FLSA's requirements.

A lesser, but nevertheless important, consideration regarding a company's use of interns, is whether interns are entitled to the protections of the federal anti-discrimination statutes, including Title VII (prohibiting race, gender, religious, color discrimination), the Age Discrimination in Employment Act, and the Americans with Disabilities Act.  

Employers who are found to have violated the FLSA by failing to pay an employee must generally pay all wages owed (including time and one half for overtime) for the past three years plus 100% of the wages owed as an additional penalty. In addition, the employer can be required to pay the plaintiff's attorney's fees. Furthermore, if the intern is subject to federal employment laws, which looks more and more likely, employers can face liability for harassment or discrimination claims.

At a minimum, organizations should review their internship programs, or contact legal counsel to assist in developing an internship program, to ensure that interns are offered an educational and training experience. 

To minimize potential employment law issues companies should be mindful to treat all interns with the same respect, fairness and equality afforded to all employees. Providing these interns with a modified “handbook” that includes basic equal employment and harassment reporting procedures is critical in limited potential liability. Affording everyone the same quality treatment, regardless of whether they are or are not on payroll, is the best way to avoid the unexpected harassment or discrimination lawsuit.

This article appeared on April 23, 2013 on Crain’s Cleveland Business Blog.