Back-to-school time brings a fresh crop of new interns joining teams and looking for ways to hone their skills and deepen their experience. Employers benefit from internships by receiving free labor, and greater insights into a prospective employee’s work ethic than a series of job interviews may afford. Internships are touted to students as a way to get a foot in the door, to get additional experience, meet professionals willing to provide employment recommendations, and to get a leg up on the competition. And when the economy stagnates, internships may be a recent graduate’s only option.
Internships have been common in a variety of industries, including entertainment and law, for years. Startups also view internships as a means of getting extra hands on deck. But the internship game can be a confusing one for interns and businesses alike – and when a company doesn’t follow the rules to make sure an internship is a true learning experience, that intern starts to look a lot like an unpaid employee. If the company doesn’t navigate the legal maze exactly right, it may face legal battles and class action lawsuits.
Under federal law, all employees are entitled to a minimum wage, compensation for overtime, and other benefits. An employment relationship has consequences that extend beyond these requirements, including with respect to protection against discrimination, workers compensation coverage, unemployment benefits, and more. For these requirements not to apply, the internship must meet certain standards. These requirements are intended to ensure that the intern is really receiving a valuable learning experience in exchange for free labor. Unless all of the following criteria are met, the intern is legally an employee, who must be paid the minimum wage, earn overtime, and receive all of the other protections guaranteed by state and federal employment laws:
- Consistent with the educational purpose of the federal internship policy, interns must receive training from the company, even if it impedes on the work of the organization. This may not be an easy standard to meet: the benefit must be akin to training which would be given in an educational environment, such as a vocational school.
- On a related note, the interns' training must primarily benefit them, and not the company. Indeed, the company must not receive any immediate advantage from the activities of the interns.
- Interns must get hands-on experience with equipment and processes used in the industry.
- Interns may not displace regular employees of the company, but works under the close supervision of existing staff. The performance of clerical work frequently undermines a company’s attempts to meet this requirement.
- The company should carefully explain that the interns are not paid wages during the internship period, and the internship period must be finite and established prior to the outset of the internship.
- Interns are not guaranteed a job at the end of the internship. An unpaid internship cannot serve as the company’s “trial period” for employing the interns. That being said, the fact that some interns may later be hired does not necessarily defeat the arrangement. The arrangement must simply make it clear that the intern is not automatically entitled to a job upon completion of the internship.
While the federal rules for unpaid internships are the same throughout the country, additional requirements may be imposed by the state in which the company is located, so whether you are considering hiring one intern or an entire team of them, it is imperative that any company consult with an attorney to discuss how the business may appropriately structure its internship program.
The foregoing is provided for informational purposes only, is not an advertisement, does not constitute legal advice or legal opinion, and does not create an attorney-client relationship. The content may not apply to the specific facts or a particular matter. You should not act or rely on any information contained in this article without first seeking the advice of an attorney licensed to practice in your jurisdiction.