May 13 2013 – The Rules of Unpaid Internships

The Rules of Unpaid Internships

In South Carolina this past weekend, college students proudly marchedacross the graduation stage ready to enter the next stage of life.  However, with the job market still tight, many of these students may bestruggling to find employment.  That means, your business may soon beapproached by students looking to acquire some experience in theworkplace.  An internship can be an attractive option for both thestudent and the employer, but there are a few things to be aware of when instituting such a program, especially if it is an unpaid position.

The Department of Labor (DOL) has made the rules and regulationsregarding internships very clear, and businesses that use internships as a form of unpaid labor may be targeted for review.  According to theNational Association of Colleges and Employers, “an internship should be a form of learning that integrates knowledge and theory learned in theclassroom with practical application and skills development in aprofessional setting.”

The DOL Wage and Hour Division has published a set of guidelines toassist employers and interns entitled “Fact Sheet No. 71: InternshipPrograms Under the Fair Labor Standards Act.”  The information found inFact Sheet No. 71 is designed to help companies determine if theirintern must be paid minimum wage and overtime in accordance with theFair Labor Standards Act (FLSA).  The DOL identified six factors thatmust be taken into account when a company is determining if someonequalifies as an intern or an employee:

1.       The internship, even though it includes actual operation of the facilities of the employer, is similar to training which would be given in an educational environment;

2.       The internship experience is for the benefit of the intern;

3.       The intern does not displace regular employees, but works under close supervision of existing staff;

4.       The employer who provides the training derives no immediateadvantage from the activities of the intern; and on occasion hisoperations may actually be impeded;

5.       The intern is not necessarily entitled to a job at the conclusion of the internship; and

6.       The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

If all these elements listed above are met, an employment relationshipdoes not exist under the FLSA, and minimum wage and overtime provisionsdo not apply. To adhere to the DOL guidelines for unpaid internships,Collins & Lacy suggests the following steps be taken:

1.       It is strongly recommended the potential intern not be a former employee. Your intentions may be honorable and the employee may bewilling to work for free, but the appearance of a former employeeworking as an intern could be too great for the DOL to overlook.

2.       Create an internship program with written criteria, includingthe opportunity for the intern to observe and participate in all aspects of the company. Putting an intern in the mailroom for the summer wouldnot classify as an internship.

3.       When approached by an intern who is looking for experience tofurther their studies, request that the student apply for educationalcredit. Ask the intern to get permission from a faculty member who willrequire the student to report back to them at the end of the internship. This will further highlight the internship was for educationalpurposes;

4.       Have the intern sign an internship agreement that shows he/sherealizes he will not receive pay.  The agreement should also state thatthe company is receiving no immediate advantage from the activities ofthe intern, the employer and the intern understand the intern is notnecessarily entitled to a job at the conclusion of the internship andthe internship is for the benefit of the intern ; and

5.       Do not allow a supervisor or manager to utilize an intern inplace of a missing employee. This will be viewed as structured work andmore likely to be considered an employee entitled to wages for the timespent.

6.       Finally, consult your local employment attorney with questions regarding internship programs.

Following the DOL guidelines and the above suggestions on how toimplement them may protect businesses offering unpaid internships fromany legal ramifications. Moreover, if done correctly, an internship canbe an exciting and rewarding experience for both the company and intern.