Whether it's because they're simply looking for work experience, or they need to earn a few more college credits, many students are willing to intern for little to no money at all.
While many companies may see at it as the perfect opportunity to get some extra help around the office, there are a few legal issues to consider before agreeing to something for nothing.
Intern or employee?
The Fair Labor Standards Act (FLSA) requires that nonexempt employees receive at least minimum wage for all hours worked and must also receive time-and-a-half pay for all hours worked more than 40 during the workweek.
While the FLSA doesn't define what an intern is, nor provide an exemption from minimum wages or overtime for interns, it does define an employee as "any individual employed by an employer." The definition of "employ" under the FLSA "includes to suffer or permit to work."
Under federal law, for-profit organizations must pay workers unless the position fits six criteria:
- The training, even though it includes actual operation of the facilities of the employer, is similar to that which would be given in a vocational school;
- The training is for the benefit of the trainee;
- The trainees do not displace regular employees, but work under close observation;
- The employer that provides the training derives no immediate advantage from the activities of the trainees and on occasion the employer’s operations may actually be impeded;
- The trainees are not necessarily entitled to a job at the completion of the training period; and
- The employer and the trainee understand that the trainees are not entitled to wages for the time spent in training.
To ensure compliance, employers offering unpaid internships should structure the position in a way that the intern receives the full benefit of the experience.
Employers can take it a step further and establish a written agreement between the business and the intern outlining the terms of the unpaid internship. The document should contain a clear definition of the position, including that it is a learning experience.
If you're not careful, hiring an unpaid intern that later turns out to qualify as an employee could potentially cost your company thousands in unpaid wages and hefty legal fines. When in doubt, pay interns at least minimum wage to avoid legal problems.
Unpaid internships that do not match all six of the DOL's criteria could also lead to legal problems involving workers' compensation, employee benefits, discrimination laws, federal and state taxes, and unemployment insurance coverage.
Failing to comply with wage and hour laws can lead to serious FLSA administration errors that could cost your business thousands in fines. Tools like the FLSA Compliance Kit can help you navigate through every FLSA regulation from child labor laws to timekeeping discrepancies.
Any additional advice for companies hiring unpaid interns for the summer? Please leave a comment and share your tips.