The Innovative Workplace
Avoiding legal and administrative pitfalls in an internship program
Summer is here and students are looking for jobs. Some may even offer to work for no pay, just to get job experience to put on their résumés. As employers, we know that internships offer students opportunities to gain real-world experience, make business contacts, identify career interests, and gain an edge in a competitive job market.
We also know that hiring interns gives our own business and our clients’ businesses access to highly motivated and educated young workers, who can help get work done while we gain new insights into what younger consumers value for marketing our products and services. The practice also allows our junior managers to gain more experience training and supervising these workers.
This seems like a perfect solution for both intern and employer, especially if it is low- or no-budget, right? If the internship meets certain criteria, such as when the employer provides specific vocational training that could be eligible for college credits during the internship, it is a great solution.
If the internship does not meet those criteria, however, there are potential legal and administrative pitfalls that many employers overlook. By identifying and managing these risks, you can help your clients and your agency avoid liability, employee relations issues, and administrative hassles when hiring interns—at any time of the year.
Consider the pay issue carefully
According to the National Association of Colleges and Employers Class of 2016 Student Survey Report, 56% of 2016 graduating seniors had internships in the for-profit, private sector, which is governed by the federal Fair Labor Standards Act (FLSA) regulations. The FLSA sets standards relating to pay practices, and government enforcement efforts have increased regarding ensuring that unpaid internships meet the criteria for exemption from pay. Many experts advise that employers in for-profit businesses should pay interns at least the minimum wage to avoid potential scrutiny.
Even within higher education, where programs are evaluated based upon the success rate of placing students with jobs where internships boost placement rates, career services professionals say students should be paid at least minimum wage. Part of their rationale is that, when employers ask that students receive college credit for their work in order to avoid having to pay them, this demand puts students from low- or middle-income backgrounds at a disadvantage. That’s because students must pay for that course credit—a cost that can add up to several thousand dollars. And this cost often is in addition to money lost when a student no longer has time to work a paying job, in addition to—or because of—the non-paying internship.
Others suggest that not paying students for their labor is an ethics issue. After all, they are working alongside regular employees—often doing some of the same tasks—and not being compensated for that work. This may even send the message to regular full-time employees that their work, or time, is not valued. Further, customers or the community may view the employer as taking advantage of these students.
Among the issues surrounding internships is whether the FLSA even applies to interns. The FLSA does not define “intern,” nor does it provide an exemption from minimum wage or overtime for them. But this does not necessarily mean that student interns must be compensated. The FLSA acknowledges that not all persons who perform some duties for an employer subject to the FLSA are “employees,” and thus entitled to compensation in accordance with wage and hour laws. Most HR and legal practitioners, however, take the view that an intern is defined as a professional in training, and employers using an intern’s services should adhere to the standards set forth under the FLSA.
If you or your clients are struggling to decide whether to pay interns, review the following FLSA requirements (generally considered the FLSA “six-factor test”) to determine whether the training provided meets the “learner/trainee” rules:
- The training must be comparable to that given at a vocational school (for example, the intern could pay to receive the training somewhere else).
- The training must benefit the student.
- The student would not replace a regular employee (the intern cannot fill in for someone on a short-term disability or out for the day).
- The employer does not immediately benefit from the student’s activities. (This requirement is especially troublesome for employers, because the company does expect to receive a benefit from the intern’s labors. Practically, this means that the intern cannot deliver mail, sort files, file papers, organize a person’s calendar, conduct market research, write reports, schedule interviews, or do any other job that assists the employer in any way in running their business).
- There is no promise of a job following the training.
- Both the employer and the student understand that no wages will be given for the training period.
The Department of Labor fact sheet regarding student interns has more detailed information on this topic. In addition to the federal rules, states may have conditions that employers must satisfy. Failure to offer training meeting these mandates for unpaid status could lead to employer penalties, including back wages and possible overtime pay to both present and former interns.
When in doubt, pay the student. In addition to the government enforcement efforts, students are more aware of the issue, and we’re seeing more lawsuits filed by unpaid interns claiming back wages and possible overtime under both the federal FLSA and state laws. If you are uncertain how much to pay interns, you can consult with your local high school or college placement center, where counselors may be able to give you some direction on what other employers in your area are paying. Pay levels for internships are typically determined by a student’s year in school and field of work.
Practical human resources tips for hiring interns
Before hiring an intern:
- Develop an intern policy and define the job carefully, so that both parties are clear about job duties and expectations. This reduces misunderstandings that can lead to lawsuits. The policy should define the basic internship program, such as compensation structure (or spell out that interns will not be paid), benefits eligibility requirements (if applicable—please note that if the employer is considered an applicable large employer subject to the Affordable Care Act employer mandate, the intern’s status and hours of work may trigger benefits eligibility), and the intern’s at-will status. Make sure the policy does not establish what could be viewed as a legally binding contract. Never imply the promise of employment for a specified period.
- Define supervisory roles and supervisor/intern evaluations. Reliable supervision is the key to preventing problems, including injuries, discriminatory actions, and performance failings. Make sure that all supervisors know who is overseeing the work of each intern.
- If possible, obtain formal documentation from the intern’s college or high school explaining the educational relevance of the internship if it will earn the student credits.
- Ask whether the school provides liability insurance to cover damage caused by a student. Many schools carry the coverage. In addition, check your employment practices liability insurance to determine if it extends to interns.
Once you’ve agreed to bring the intern on board:
- Onboard the intern by covering the company’s vision/mission/values, orienting him or her to your company’s products and services, and providing a roadmap of how things get done within the company. Cover the important company policies that all employees, regardless of status, must follow.
- Confirm pay and benefits (if applicable) and explain pay dates.
- Make sure to comply with child labor laws that may affect the age groups of each intern.
- Limit teen interns’ hours. If the internship program reaches out to high schools, the FLSA’s or state’s child labor provisions may curb students’ hours and duties. For more details on child labor laws, visit the Department of Labor Youth Labor site. Check your state labor laws, which may require stricter child labor standards. Be sure to determine whether your state requires work permits or proof-of-age certificates for minors.
- Manage interns as closely as employees, if not more so. The company can be held responsible for the actions of any workers, including unpaid interns, while they are performing work on behalf of the business. Courts will view interns as employees, as “agents” of the company.
- To ensure that interns are paid correctly and to avoid the possibility of FLSA violations, make sure each intern accurately records time worked and that they are paid for all hours worked, including applicable overtime.
- Apply the company’s workplace policies to interns, for both consistency and positive employee relations reasons. Interns who are considered “employees” have the same legal protections as regular employees, and even unpaid interns may be able to pursue claims under Title IX, which bans sex discrimination in “any education program,” or pursue common-law job-bias claims, such as infliction of emotional distress.
Hiring summer students is a great way to help youth in your community learn what it takes to be successful in business, while helping employers get special projects completed. Plan ahead and work with your clients to structure hiring so that the summer internship program is a great experience for everyone.
Laura Kerekes is ThinkHR’s Chief Knowledge Officer and leads the ThinkHR content knowledge and human resources service delivery teams. In addition to her company responsibilities, she writes management, human resources and business articles and presents regularly to management groups regarding human resources best practices. She holds both the HRCI Senior Professional in Human Resources (SPHR) and SHRM-SCP professional designations.
About ThinkHR: ThinkHR partners with over 650 leading insurance brokers and payroll bureaus with an HR knowledge platform that enables their clients to obtain quick answers to urgent risk and liability questions, protecting clients from loss and legal action; stay informed on the correct responses and decisions for HR management and compliance matters; create web training programs to educate and develop employees in the areas of safety, management and wellness; and save time and money versus expensive alternate legal and HR resources.