Is Your Unpaid Internship a Legal Liability?

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Tis the season for summer interns. But if you’re stuck in the old, romantic idea that an intern is someone who will do “whatever it takes” to break into

Your summer intern: She's sweet and smart and eager. And she knows her rights.

Your summer intern: She’s sweet and smart and eager. And she knows her rights.

the business, or support his or her passion for your non-profit, you need to think again. Because interns have started suing organizations. And the courts are backing them up.

In 2012, some very high profile class action cases involving Hearst Corp, Fox Searchlight Pictures and The Charlie Rose Show on PBS were filed. They’ve resulted—so far—in hundreds of thousands of dollars being paid out to interns who worked for the Charlie Rose Show, researching guests, assembling press packets and cleaning the green room, among other tasks. Jobs that were crucial to the show’s operation but for which the interns were not paid. The show paid $50,000 in plaintiff’s court costs, too. No agreement has been reached on the other two cases.

Call them slackers or call them sophisticated, the point is, young people have the same expectations we all have, to come away from hours of work with something valuable. So if you’re not going to pay them, you’d better be able to show you provide them with experience they can use to pry open the next big career door.

The Department of Labor has cracked down, in recent years, on unpaid internship programs and the Fair Labor Standards Act is very specific on what constitutes a valid unpaid internship program. To be a legal, an unpaid internship:

  1. Has to be similar to training the intern would receive in an educational environment.
  2. Is for the benefit of the intern.
  3. Doesn’t use an intern to displace regular employees but works under close supervision of the staff.
  4. Gives the employer no immediate advantage from the activities of the intern; and on occasion its operations may actually be impeded. (Read: It’s a learning process for the intern even if it’s slow and messy.)
  5. Doesn’t necessarily entitle the intern to a job at the conclusion of the internship
  6. Has a clear understanding on the part of both employer and intern that the intern will not earn wages during the internship.

In each of the court cases mentioned, the interns understood that the internship was unpaid. But something about the arrangement made the internship questionable. In the Hearst case, interns were schlepping out closets for the fashion magazine—hardly an educational experience. In the Fox case, interns were doing the work that would have been assigned to regular, paid employees, but for free.

Companies have found a variety of ways to deal with the internship question. Some give interns a semester stipend for the internship. Others pay hourly minimum wage, which—depending on the quality of your intern—is still pretty cheap for educated labor.

In a university town like Austin, there are tens of thousands of students or recent graduates looking to beef up their resumes with a solid internship. But companies that don’t want to pay them have to put some real thought into making the internship a valuable experience, meaning ensuring that interns aren’t just filling in for someone who would get paid and that they’re getting a supervised educational experience in a field that will help their careers.

And creating a valuable program like that has its costs, too. So before the armies of interns come in, check to see if you’re in compliance with Fair Labor Standards. Or you may wind up paying a lot more than minimum wage.

We work with companies on a project basis or on retainer, providing a custom level of HR help designed for your business. Contact me at Caroline@valentinehr.com or call (512) 420-8267.

We work with companies on a project basis or on retainer, providing a custom level of HR help designed for your business, with offices in Austin, San Antonio, Dallas and Houston. Contact me at Caroline@valentinehr.com or call (512) 420-8267.

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