Hiring A Summer Intern: To Pay or Not to Pay

The summer is fast approaching and perhaps you are considering hiring summer interns for your business. Why not? Hiring summer interns is a great business strategy. Summer interns are a great way for your business to increase its recognition in the marketplace, recruit future talent, liven up your workplace, and provide your current employees with an opportunity to gain experience serving as a mentor and a manager. 

However, there are some legal risks involved with hiring interns. Whether your interns are paid or unpaid, many of the legal risks associated with traditional employees also apply, including, for example, anti-discrimination laws.  

When it comes to unpaid interns, violating the Fair Labor Standards Act (FLSA) is one of the biggest risks for "for-profit" businesses. Internships at "for-profit" businesses will typically be viewed as employment, unless the internship is deemed exempt by the U.S. Department of Labor.

To ensure that your business' internship program is exempt you must make sure the program is properly structured. 

The 6-point test for determining if an unpaid internship program is exempt from FLSA's requirement to pay interns a minimum wage and overtime, according to the U.S. Department of Labor, is as follows:

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 instead works under close supervision of existing staff;
4. 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;
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 of the factors listed above are met, no employment relationship exists under the FLSA, and the FLSA’s minimum wage and overtime provisions do not apply.

In addition to federal laws, your business must also consider what state laws apply to the internship. Check out this list of cases, summarizing internship-related lawsuits filed over the past 3 years. While you cannot prevent lawsuits, you can increase the likelihood of your business winning a lawsuit.     

So, remember unpaid internships are not meant to be free labor for your business. Before you bring on your interns this summer, make sure you have a formalized internship program that complies with both federal and state laws. Once you have written down the details of your internship program make sure you have them reviewed by both your human resources department and an attorney. 

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