Pitfalls of summer internship programs

Along with warmer weather and commencement ceremonies, summer internship programs are another sign of the changing seasons. Many employers utilize a student workforce during the summer months. Often, such internships are unpaid or provide low pay or subminimum wage stipends in lieu of wages. Such arrangements may seem like a win- win: Employers reap the advantages of plentiful cheap or free labor, while students obtain résumé-building experience and learn valuable workplace skills. Unfortunately, the U.S. Department of Labor (DOL) doesn't take such a simple view of internship programs.

Wage and hour compliance

The DOL operates under the assumption that anyone who provides services to your organization is an employee, subject to the record- keeping, minimum wage, and overtime provisions of the Fair Labor Standards Act (FLSA). If you are audited, you will have the burden of proving that the FLSA doesn't apply.

Fact Sheet #71, available on the DOL's Wage and Hour Division (WHD) website ( http://www.dol.gov/whd/) lists the six criteria that must be satisfied in analyzing whether an internship is properly classified as unpaid:
 

  1. The internship, even though it includes actual operation of the employer's facilities, is similar to training that 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 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.
  6. The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

Unpaid internships have been increasingly subject to challenge by the DOL and in the courts, including in several recent high-profile cases in which unpaid interns in the entertainment industry were found to be actual employees entitled to back wages (including overtime). The rules may differ somewhat for public employers and nonprofit organizations, but internships won't necessarily pass DOL scrutiny even in those settings if the work being done is primarily for the benefit of the employer rather than the intern.

Other concerns

In addition to the FLSA issues, employers utilizing interns must think about whether the workers will be covered by workers' compensation and unemployment insurance, general liability insurance, and/or applicable employee benefits plans. So if your organization is thinking about implementing a summer internship program, the best course is to seek the advice of an experienced employment attorney.

Kara Shea is a partner in Butler Snow's Nashville office and is the practice group leader in the labor and employment group. She may be reached at kara.shea@butlersnow.com.

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