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Internships Can Pose a Litigation Threat: Six-Question Test You Need to Take

Insight Thomas M. White Thomas M. White · July 14, 2014

This article was published in Recruiting Trends and can also be viewed here.

Are you recruiting interns this summer or in the fall to buttress existing staff? For a long period of time, few businesses put in the effort to analyze and determine whether interns need to be paid. But because of increased litigation and enforcement activity, all for-profit businesses should be concerned about how they use interns.

The Department of Labor considers six criteria when analyzing whether an intern is employed for purposes of the Fair Labor Standards Act and is consequently entitled to be paid the minimum wage and overtime pay. Some of these factors are easy to understand and satisfy. Others are fact specific and, therefore, subject to additional scrutiny by the DOL and the courts. Many states and local jurisdictions have their own tests and these local requirements may match only in part the federal considerations.

1. Is the internship similar to training given in an educational environment? For example, would the intern pay to receive this training elsewhere? Is the intern receiving academic credit for this experience? The more an internship is built around academic experiences, as contrasted with the business' actual operations, the greater the likelihood that the internship will be considered an extension of the intern's educational endeavors. 

Businesses may want to consider coordinating their internship programs with the requirements of educational institutions. The business may want to determine if the intern can receive academic credit for his experience. In other cases, businesses may want to analyze whether the internship will assist the intern in satisfying educational requirements imposed on those seeking to enter or practice particular professions.

2. Is the intern's experience for the benefit of the intern rather than that of the business? Does the intern receive a skill transferable to several employers or just this business? It might be appropriate for the business to hold on-site classes for its interns and provide other formal instructional activities.

3. Does the intern work alongside regular employees under close supervision of the regular staff and not displace compensated employees? Interns cannot fill in for employees who are absent due to vacation or illness. Nor can they be added to the workforce during peak work periods. Job shadowing, where the intern performs little or no work, looks like a bona fide training and educational experience. 

Moreover, in these cases, the supervisor is not performing his other duties and this results in a detriment to the business which also suggests that the intern is not an employee.

4. Does the intern provide the employer with any immediate services or advantages? This test is the most difficult to apply. This means that the intern cannot perform menial activities. For example, interns should not photocopy documents, run errands, fetch coffee or accept customer orders. 

This test requires determining does the business or does the intern receive the most benefit from the experience. Under this prong, the intern should not perform the routine work of the business on a regular basis and the business should not be dependent on the efforts of the intern.

5. Does the intern understand that he/she is not entitled to a job at the conclusion of the internship? Unpaid internships should be for a fixed duration determined prior to the start of the internship. An unpaid internship should not be a probationary period for job-seekers. The DOL has taken the position that if there is an expectation of employment at the end of the internship then the individual would be considered an employee entitled to compensation.

6. Do the business and the intern both understand that the intern is not entitled to compensation for the time spent in the internship? The duties that the intern performs are critical and a person cannot agree to waive his/her rights to compensation if the relationship is that of employee-employer. The unpaid nature of the relationship should be reduced to writing and signed by both parties.

Internships used to be an afterthought for businesses. However, as recent cases have shown, business leaders cannot afford to be blind to the government's interpretation of the law. Those who supervise interns should be trained in the requirements of the law and legal counsel should be engaged to make sure that legal requirements are satisfied.