Many employers consider hiring interns during the summers or school year to help students gain experience or learn about a certain industry or career. However, when these interns are unpaid, there are certain rules employers need to follow to guard against liability for failure to pay minimum wage or overtime under the Fair Labor Standards Act—which carries risks of lawsuits by former interns (a few of which have been very recently filed), class actions, and DOL investigation and other enforcement activities.
In fact, in the last few years the DOL has focused some attention on unpaid internships, as we said in a previous post on this topic. The DOL guidance on this topic certainly reveals some traps for the unwary who hire unpaid interns, All of the below factors must be met in order for an intern working at a private, for-profit employer to be appropriately unpaid:
- 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 the time spent in the internship.
There are a few factors above that are very easy for employers to overlook. For example, according to the DOL, employers receive "immediate advantage" from work that interns often perform, like filing, answering phones, or assisting customers. In short, if unpaid interns are asked to do work that could be, should be, or is typically performed by paid employees, the internship looks less like an educational experience and more like an employment relationship , requiring the intern’s work to be paid.
So, before interns start, employers should consider what type of work they will be asking their interns to perform. If the interns’ responsibilities are more like "job shadowing" or classroom-like activities and the interns aren’t asked to do much (if any) productive work, then it may be appropriate to make them unpaid, as long as all of the other factors above are met. On the other hand, employers who wish to have interns perform work for their benefit don’t have to avoid hiring interns altogether—as long as interns who perform productive work, however minor, are paid minimum wage (and overtime as appropriate under the FLSA), employers aren’t prevented from having interns do work both for the employer’s benefit and the intern’s.