SUMMER INTERN TRAP

Particularly in today’s economic climate where college students and graduates find it difficult to secure employment, unpaid internships have become more common. Many employers, however, are unaware that interns need to be paid in certain circumstances. The U.S. Department of Labor has established the following six-part test for determining whether a person may participate in an internship program without compensation:

  • “The internship . . . 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.”

As the relevant federal and state rules are complex and enforcement efforts specifically targeting unpaid interns have increased, ensuring compliance is essential. Not paying an intern when required can render a company liable for back pay and, under recent court decisions, can make individual decision-makers personally liable for violations of the wage and hour laws.

Even when employers pay interns or summer help, they must be mindful of observing all wage and hour laws. One common failing is the practice of paying an intern a weekly salary or stipend, regardless of the number of hours the intern works. When interns are acting as “employees” and work more than forty hours in any work week, employers must pay them overtime at time and one-half the hourly rate (the number of hours in the regular work week divided into the weekly salary).

If an organization or company decides to utilize interns, whether unpaid or paid, it should carefully analyze all federal and state regulations to ensure compliance and avoid potential liability.

This Update is not intended to be legal advice, but rather is intended to inform the reader of problem areas and recent developments in labor and employment law. If legal advice is required concerning a particular matter, your attorney should be consulted.