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Human Resources

Legal Concerns Surrounding Internships

When administering internship programs, many employers raise questions regarding the legal implications and requirements of paid and unpaid internships. Court rulings in 2013 have had an impact on uncompensated workers and raised publicity around cases involving the work of unpaid interns at Condé Nast and on the set of “Black Swan.”

Unpaid internships are not inherently illegal, but they must follow specific guidelines. Employers and educational professionals must be cautious about this practice and be sure they’re following all legal requirements. This guide explores the legal implications surrounding wages for interns, criteria for unpaid interns and liability of schools and employers for students in the workplace.

Interns and Employment

An internship is a form of experiential education where students work to apply what they know to real situations and build new skills. Sometimes internships are required for graduation.

The Fair Labor Standards Act (FLSA) typically sets a very broad definition for “employees.” According to the FLSA, “employ” means to “suffer or permit to work.” Any individual who fits this definition must be compensated for any services they perform for an employer.

Internships in the for-profit sector should be viewed as employment, and interns should be paid at least minimum wage, unless an individual fits six very specific requirements to work without compensation as outlined below.

Criteria

To help determine whether interns must be paid for services in the for-profit private sector, a list of criteria is provided by the U.S. Department of Labor.

This list helps determine whether an individual is an employee and must be paid at least minimum wage and overtime or qualifies as an unpaid learner or trainee.

Under the Fair Labor Standards Act, individuals must meet these six criteria from the U.S. Department of Labor to work without compensation:

  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 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.” (U.S. Department of Labor, April 2010)

If all of the above factors are met, an individual is not considered an employee under the FLSA and is not covered by wage laws. Since the definition of employment given by the Department of Labor is very broad, exclusion from this definition is very narrow. If the internship fits each of these descriptions exactly, they can be exempt from compensation; otherwise the employer is legally required to pay them at least minimum wage (with overtime if necessary).

One exception to these criteria is nonprofits and the use of interns as volunteers. The FLSA makes an exception for individuals who work for state or local government agencies and those who volunteer for humanitarian purposes. Volunteering is also an exception for those who freely and without expectation of pay provide services for most other organizations, public or non-profit. This exception is currently being reviewed by the United States Wage and Hour Division.

Additional criteria may vary by state (for example, New York requires that students be notified in writing that they will not be paid for their duties), and wage requirements for paid interns can also vary. Refer to your state laws regarding internships to ensure you remain legal.

Liability and Compensation

There needs to be proof that an injury occurred at the workplace or while pursuing the employer’s business purposes for anyone to receive workers’ compensation.

Workers’ compensation for interns varies greatly by state. Some states specifically exclude interns from coverage, while others do not. You can check with the Department of Labor for information regarding the laws in your state.

If an intern has workers’ compensation benefits, they cannot sue for negligence with unlimited damages. For this reason, it is beneficial for an employer to provide coverage even if it is not required by their state.

If workers’ compensation does not apply, a student could potentially sue their school as well as their employer, given that the school had direct knowledge of danger to a student or had a role in the workplace. The school’s liability depends upon the level of involvement in the internship and the supervision of the intern.

Further Information

Internships provide students with irreplaceable experience and networking in addition to school credit. Employers benefit by training students in their operations and identifying prospective hires. The best way to remain compliant is to focus on creating an educational environment and to make no verbal commitments for continued employment.

For complete information, visit the Wage and Hour Division website and/or call The Department of Labor’s helpline at 1-866-4USWAGE (1-866-487-9243).

 
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