Paid vs. Unpaid Internships
For paid internships, employers must compensate interns at least the federal minimum wage to comply with the Fair Labor Standards Act (FLSA). Private sector, for-profit businesses almost always have to pay interns, at least minimum wage and overtime pay. Take care to adhere to federal, state, and municipal laws governing minimum wage. On the other hand, public-sector and nonprofit organizations have more flexibility.
The DOL ascribes very narrow exceptions to this rule, so the easiest solution is to pay interns a legal wage.
For unpaid internships, DOL has established seven point Primary Beneficiary Test that must be met for an intern to qualify to work without compensation:
- The employer and intern must both clearly understand that there is no expectation of pay. Any promise of compensation converts the intern into an employee.
- The training provided by the internship must be similar to that provided in an educational context, akin to that available in a clinic or other hands-on training environment.
- The internship experience complements the intern’s formal education through integrated coursework or the receipt of academic credit.
- The internship accommodates academic commitments and calendar.
- The internship lasts only long enough to provide the intern with beneficial learning
- The intern’s work complement, rather than displaces, the work of paid employees and provides significant education benefits.
- The intern and employer both understand that the internship provides no right to a paid job at the end of the internship.
- If held to be an employee, then the intern is eligible for minimum wage and overtime, Social Security withholding and matching, unemployment insurance benefits, and workers’ compensation. The employer may also be on the hook for health coverage for full time employees under the Affordable Care Act, back pay of FICA taxes (plus interest), and penalties for missed FICA payments.
Other Legal Issues
Some states impose additional criteria. New York requires that internship train transferable skills and can’t be of any “immediate advantage” to the employer.
Employers should take care to comply with state child labor laws (age limits vary by state). Federal child labor laws do not apply to individuals over 18 years. On the other hand, employers may not discriminate against older individuals; the Age Discrimination in Employment Act protects individuals age 40 or older.
Differences in age and experience between interns and their supervisors may also lead to claims of sexual harassment, investion of privacy, and defamation. Ensure that your organization provides extensive training on these subjects to employees as well as interns.
Finally, make sure your employees do not violate federal and state immigration laws if they overstay their visas, leading to illegal immigration.
Benefits of an Internship Program
Why do businesses create internships? Some reasons include:?
- Interns provide relatively inexpensive labor in return for training.
- Employers can test out a pool of potential candidates before hiring full time.
- Employers can improve brand recognition and gain positive marketing exposure as well as increasing community involvement.
- On the flip side, interns gain valuable experience, including:
- Hands-on training,
- Relevant experience to enter a new industry,
- Acclimate to the professional environment and better understand workplace demands,
- Potential foot-in-the-door to a coveted job opportunity,
- Expand network of contacts.
If you’re not sure whether your internship program adheres to legal guidelines, reach out to a LawChamps attorney. It’s often cheaper to ensure that an internship meets legal standards before hiring an intern.
This article is intended to convey generally useful information only and does not constitute legal advice. Any opinions expressed are solely those of the author, not LawChamps.
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