Unpaid Internships: Risky Business or Business as Usual?

“The answer to the question, ‘Are unpaid internships worth the risk?’ is that only the organization being asked to provide one can decide this in the context of its own circumstances, capabilities, and philosophy… If management concludes that is willing to allow unpaid internships, then it should plan, structure, and supervise them very carefully, bearing in mind the ambiguous criteria that will be applied should an intern later decide to claim that he or she should have been treated as a paid employee under the FLSA.” (Are Unpaid Internships Worth The Risk? by Fisher & Phillips LLP)

Summertime, and the livin’ is easy … unless, of course, you have an unpaid intern – in which case, the livin’ is fraught with all sorts of legal and human resource complications you might not have even considered. Until now, that is.

For your reference, from lawyers and law firms on JD Supra, five considerations regarding internship programs to help you stay out of trouble:

1. There are specific regulations governing unpaid internships…

“The Federal Fair Labor Standards Act (FLSA) and most if not all states require employees to be paid a minimum wage for all hours worked, and overtime for all hours worked over 40 in a week. While the FLSA and some state wage laws make an exception for unpaid internships, the exception is narrow. According to the U.S. Department of Labor, the unpaid internship is lawful only if it meets [specific] criteria.” (Unpaid Intern: The Unpaid Employee? by Mintz Levin)

2.Penalties for not paying interns who work as employees can be severe… 

“You’ll face legal exposure both from the government and a potential lawsuit. Penalties can include owing back pay, taxes not withheld, Social Security, unemployment benefits, interest, attorneys’ fees and liquidated damages (double the unpaid wages).” (Intern + Output = Paycheck by Fisher & Phillips LLP)

3. Providing college credit when wages are due isn’t a good strategy…

“Employers sometimes assume mistakenly that interns are not entitled to wages simply because they are receiving academic credit for their work, but academic credit does not excuse employers from paying wages that are otherwise due if the criteria discussed above are not satisfied.” (Rules Regarding Interns Looser Than in the Past, But Wages Still Required in Many Cases by Hopkins & Carley)

4.Running a nonprofit? The same rules apply…

“Our earlier post prompted questions about whether federal Fair Labor Standards Act principles are different for unpaid internships at non-profit organizations or for those sponsored by educational institutions for which the intern receives academic credit.  The short answer is:  No, they are not.” (Unpaid Internships At Non-Profits Or Arranged By Schools by Fisher & Phillips LLP)

5.In spite of the challenges, internships can work…

“But employers should not be fearful of providing true internships. As the calls start rolling in, every employer should ask itself one key question. Who is benefiting from this relationship? If the employer benefits, most likely the intern is doing work that the employer should be paying for. Internships are really for the student’s immediate benefit. Internships are not a clever way to save money. They are instead, an investment in the future.” (Rite of Spring: Requests for Internships by Sands Anderson PC)


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