For many people, summer means taking a holiday and enjoying ice cream at the beach with their toes dipped in the sand. For many companies, summertime is the season for hiring interns.
If your organization is considering bringing in student interns, you’ve likely pondered whether they should be paid. After all, many would be thrilled to have the opportunity to get some real-life professional experience under their belt, and would readily agree to participate in an unpaid internship. But is that really up to them…or you?
In the last few years there has been a wave of incidents where unpaid interns have sued employers over alleged Fair Labor Standards Act (FLSA) violations ― sometimes in class action lawsuits ― claiming that they should have at least been paid minimum wage for all hours worked. Many of them have prevailed in getting paid back wages and overtime, which can come at a hefty and unexpected cost for companies.
Here is what you should know
First of all, if you’re a non-profit entity or a public employer, you generally don’t have to pay interns if they volunteer or do not have any expectation of compensation. If you’re a private for-profit employer, however, things are a bit trickier. Luckily, the U.S. Department of Labor has provided some guidance in the form of a six-factor test to determine if an internship can qualify as ‘unpaid’ under the FLSA.
- The internship should be similar to training given in an actual educational environment. The more you can build the internship structure around the academic experience, the greater the likelihood that it could be considered an unpaid role.
- The internship is for the benefit of the intern. Make sure the intern ― not your company ― is the main beneficiary of the program and activities. Ask yourself: will the intern learn any applicable or transferrable new business skills?
- The intern doesn’t displace a regular employee. The intern cannot fill the role of employees who are on vacation or otherwise taking time off.
- The employer derives no immediate advantage from the intern’s activities. Approach this by determining which party will derive the primary value from the relationship. If you plan to ask the intern to spend his or her time making photocopies, sorting mail, or performing basic administrative tasks, for example, you best be prepared to pay at least the minimum wage.
- The intern is not entitled to a job at the end of the internship. In other words, the intern should not be of the understanding that the internship is a probationary period for a permanent position. In fact, unpaid internships should have defined start and stop dates.
- Both the intern and the employer understand that the intern is not entitled to wages for the time spent in the internship.
If you are able to meet all six of these criteria, then the intern can be classified as an unpaid intern under the DOL guidelines. If you are not able to meet even one of these, then you should consider the internship to be a paid position and compensate the intern accordingly, and also pay overtime for any hours worked over 40 in a workweek. In either case, you would be wise to carefully capture and account for all of their work hours in an automated time tracking system.
Setting up a valid unpaid internship program requires thoughtful consideration, and companies should ensure that all parties are on the same page as far as expectations about the arrangement.
The main takeaway to remember is that, in order to ensure an internship can be legally considered ‘unpaid,’ you should not ask summer interns to do things for your benefit ― such as tidy your files, get your car washed, or even grab an ice cream for you ― save that for your holiday at the beach.
For more information, see the U.S. Department of Labor Fact Sheet, available at: