Repeat after me. Unicorns are NOT real. Unicorns are mythical creatures.
With summer at our doorstep, graduates are actively seeking to get their foot in the door in the corporate world, and businesses are looking to recruit interns to support their learning and career development, as well as possibly hire employees longer term.
It sounds like a win-win scenario, right? The reality is, however, that many businesses – mostly due to lack of foresight – do not manage their internship programs effectively, in turn exposing themselves to compliance risks.
A lot of the issues stem from whether the intern will be unpaid or paid. The Fair Labor Standards Act (FLSA) provides six criteria that must be applied when determining if a company can enlist unpaid interns. According to the FLSA, “In general, the more the internship provides the individual with skills that can be used in multiple employment settings, as opposed to skills particular to one employer’s operation, the more likely the intern would be viewed as receiving training. On the other hand, if the interns are engaged in the operations of the employer or are performing productive work… [this] will not exclude them from the FLSA’s minimum wage and overtime requirements.”
There have been a string of high profile class-action lawsuits in the last few years that demonstrate the lack of preparation or awareness by businesses when it comes to unpaid internships. For example, interns who worked as production assistants and bookkeepers on the Hollywood film “Black Swan” alleged that the production house violated federal and state labor laws by failing to pay minimum wage and overtime. The judge ruled in favor of the interns and while Fox is appealing the decision, it has set in motion a wave of additional lawsuits.
NBC Universal reached a $6.4 million settlement with interns who waged a class-action lawsuit against the company for improperly classifying them as non-employee interns exempt from minimum wage regulations, when their duties went beynd that of an unpaid intern. Viacom, which owns MTV, recently paid $7.2 million for a lawsuit over unpaid internships.
While unpaid internships seem like a cost effective way to train and uncover new talent, businesses need to take the time to set up the right procedures to ensure that they are compliant with labor regulations. Considerations include:
1. Be aware of the US federal and state specific requirements for unpaid internships
2. Establish clear and comprehensive corporate policies around internships
3. Define the timeframe and goal for the internship
4. Do right by your employees – do not look to replace paid employees with interns
5. Hire interns who can learn and benefit from existing opportunities within your business
6. Focus on not just finding talent, but on education and training opportunities for interns
7. Provide training that qualifies the intern to work in any similar business
8. Have an assigned mentor who can work closely with the interns and make their internship a fun experience
9. Correctly classify interns as volunteers, trainees or independent contractors based on the duties they perform
10. When in doubt, seek legal counsel – make sure that the intern’s time worked has been tracked so that he or she can be paid accordingly
While businesses have been negatively profiled due to unpaid internships or programs that take advantage of the intern, there is great value for both the employer and individual if they help accomplish goals relating to learning, building important relationships and honing important career skills for the future.