Getting ready to welcome unpaid summer interns? Make sure company largesse doesn’t come back to bite you.

With the dogwoods in bloom and the azaleas not far behind, many employers are approaching the season when they will welcome summer interns. Summer internships provide invaluable opportunities for students to learn about the business world or to spend some time in an industry where they may want to build a career. But utilizing interns, if not handled carefully to comply with the law, can result in later headaches for employers and leave employers open to claims that they abused the summer workers as free labor for which they must pay.

The starting point for any employer planning on placing interns within their company is to consult with the U.S. Department of Labor’s guidance on the issue. The DOL’s Wage and Hour Division has prepared an overview (available here) of the high points for employers to keep in mind which is contained in Fact Sheet #71. The fact sheet emphasizes six points for employers to follow to ensure that unpaid interns are not actually employees who are being denied their lawful pay.

For Profit and Non-Profit Distinction

According to the DOL fact sheet, for-profit entities face a much higher bar in categorizing interns as interns rather than employees. The fact sheet states that interns in for-profit businesses will be most often viewed as employees unless the factors within the fact sheet are met.

Who Benefits?

The touchstone for whether an internship is in fact employment is which party is actually the primary beneficiary of the relationship. If the relationship clearly reflects indicia of its educational purpose for the intern, it will be deemed a true internship. If the relationship looks more like one where the employer utilizes a worker to perform its normal and customary business with the added benefit of not having to pay the worker, it will not qualify as an internship, and the employer will be found liable for wages. The DOL uses the six criteria listed in the fact sheet to determine whether an internship legally qualifies as such and pay is not required:

  • 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
  • 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 derives 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 the intern understand that the intern is not entitled to wages for time spent in the internship.

If all of these factors are met, the DOL advises, the employer is relieved of the minimum wage and overtime requirements of the Fair Labor Standards Act.

Practical Pointers

It is always wise to check with employment counsel to make sure your program passes muster. Short of that, as a practical matter, employers should adhere to the following guidelines in using interns in order to stay out of legal trouble:

  • Keep the internship to a fixed term that is established before it begins. An ongoing arrangement without a firm end date is going to raise the suspicion that it is truly employment.
  • Have both the intern and an employer representative sign an internship agreement at the start of the relationship, setting forth the understanding of both that the relationship is not one of employment and no pay is expected or will be given.
  • Determine at the start of the internship certain educational goals you expect the intern will attain. Incorporate some clearly educational aspects to the internship. For example, hold a weekly class on some issue related to your business that is beneficial to the intern. Test the interns on their grasp of information conveyed if possible. Assign mentors and ensure they are meeting regularly with the interns to provide feedback and instruction regarding the activities of the intern.
  • Make sure you are not relying too heavily on the tasks performed by the intern. If the intern’s labor is essential to the employer, the intern should be classified as an employee.