Schools out for summer, and theres a rush of young students and recent graduates looking for internships. If theyre done correctly, these training programs can be beneficial for both companies and interns. But businesses that dont compensate interns for the work they perform can end up paying a big price down the road.
In 2010, the Department of Labor released guidelines for employers in the for-profit sector to create internships that comply with the Fair Labor Standards Act. The fact sheet included a six-factor test for determining whether an unpaid internship is lawful:
- The internship, even though it includes actual operation of the facilities of the employer, is similar to training that 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.
- The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.
Joel Rice, a partner in the Chicago office of Fisher & Phillips, says that in an instance where a company was facing a claim regarding an internship program, he wouldnt rule out the possibility of court siding with an employer that demonstrated five of the six factors. But youre certainly much safer if you can show that you satisfy all six.
Rice has been practicing labor and employment law for more than 20 years. He says that the recent publicity the DOL has given to unpaid internships and misclassification of employees may account for a recent increase in private lawsuits brought by unpaid interns.
One such case came up last year, when Charlie Rose and his production company agreed to pay [link: http://www.unpaidinternslawsuit.com/charlie-rose] as much as $250,000 to a class of interns.
Outten & Golden lawyer Rachel Bien represented plaintiff Lucy Bickerton in the lawsuit. She told The New York Times, We are very pleased with this settlement, and hope that many former interns will come forward to claim the amounts they are due for their work. The firm established a website to educate other interns about possible legal violations.
While Rice hasnt frequently encountered unpaid internship programs among his clients, he says they are most common in industries with a glamorous veneer, such as media, entertainment, and advertising. These areas in particular attract young people, he says, and they may be willing to forego pay in exchange for an opportunity to gain valuable experience in the field.
But employers should keep in mind that an internship is not an opportunity for them to save money on entry-level work. Just slapping the label intern on somebody doesnt mean that you dont have to pay them.
The presumption under the FLSA is that if someone is doing work, they should be paid. The DOLs six-factor guidance for trainee exemptions is based on a 1947 U.S. Supreme Court case involving railroad workers.
Some employers are not aware that the Department of Labor has this test, says Rice, and it is actually a test that can be difficult to meet. He notes that being able to meet all of the factors primarily comes down to a question of whether the position is really benefiting the intern.
Rice recommends partnering with schools and colleges so that the intern receives course credit, and companies should consider pairing the intern with a mentor who can show them the ropes of the industry. You need to be taking up your own staffs time to expose them to your company and educating them about your industry, says Rice. And never use interns, he says, in lieu of paying some other person to get coffee or file papers.
Rice recommends that employers be clear in all of their communications with the intern about the nature of the relationship. They often want this experience to lead to future employment, he says. So the employer has to be careful about not guaranteeing them that this is going to transition to a job. And to avoid misunderstandings at the end of the stint, he says, put the terms of the internship arrangement in writing.
Some employers find unpaid internships to be too risky. Despite the risks and potential complications, internship programs can be beneficial, and Rice wouldnt advise against unpaid internships altogether. But if youre going to do it, he says, you need to do it right.
