Legal issues surrounding internships.

31 08 2009


In our current economic climate, internships are high in demand. People (or students) looking to start a new career may look to internships to seek experience. And on the flip side, small businesses without the budget to hire new employees may look hire interns. But business owners need to be sure that they don’t take on interns only to save money. Federal labor laws are fairly direct in saying that internships should be for the benefit of the interns, not their employers. Thus, it all boils down to a simple principal; an intern is not free labor.

But what is the distinction between an employee and an intern? The Fair Labor Standards Act (FLSA – federal statute governing wages) defines an “employee” simply as “any individual employed by an employer.”  The term “employ” under the FLSA means “to suffer from or permit to work.” Moreover, under the FLSA, an intern must receive training similar to that offered in a vocational school, and the training must be for the benefit of the intern.

In interpreting the FLSA, the United States Supreme Court has found that trainees may be excepted from the minimum wage provisions of the FLSA. The U.S. Department of Labor’s Wage and Hour Division used the Supreme Court’s 1947 decision to develop and outline six criteria for determining trainee status:

  1. Interns cannot displace regular employees.
  2. Interns are not guaranteed a job at the end of the internship (though you may decide to hire them at the conclusion of the experience).
  3. Interns are not entitled to wages during the internship.
  4. Interns must receive training from your organization, even if it somewhat impedes the work.
  5. Interns must get hands-on experience with equipment and processes used in your industry.
  6. Interns’ training must primarily benefit them, not the organization.

And with regard to providing unemployment compensation? Workers compensation boards have found that interns contribute enough to a company to make them employees. Therefore, it may be wise to cover interns under your workers’ compensation policy even though you are not required to do so.

In the end, for a valid internship position, any employer should be able to answer “yes” to at least half of these ten questions. And if an internship program does not satisfy all six factors of the U.S. Department of Labor’s six criteria, the trainees may be considered “employees” under the FLSA and must be compensated during their training.

Photo courtesy of the University of Baltimore.



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