How To Protect Yourself From The Hidden Dangers of Unpaid Internships

[Excerpts from a special article written by Louis P. DiLorenzo, Esq.]

It's that time of year when employers are swamped with requests from college students for unpaid internships. And for many employers, the benefits of such a relationship are obvious. An internship provides the student with an opportunity for real-life experiences, resume enhancement and a possible "leg up" in the working world. The employer receives the chance to evaluate a new applicant, at no cost.

The legal risks, however, may not be so obvious.

One area of risk is the Fair Labor Standards Act (FLSA) which requires that nonexempt employees receive the minimum wage for all hours worked and one-and -a-half times their regular rate of pay for all hours in ecess of 40 in a workweek. The $64,000 question, however, is whether the unpaid intern is an "employee" within the meaning of this and other federal and state statutes. The U.S. Labor Department has adopted six criteria for evaluating this issue.

1. The internship should be similar to the training given in a vocational school.
2. The training must be primarily for the benefit of the intern, not the employer.
3. The intern must not displace any regular employees, but must work under close supervision.
4. There should be no immediate advantage to the employer.
5. The intern must not be entitled to a job at the completion of the internship.
6. The intern and the employer must understand that the intern shall receive no pay for the training.

If your organization uses unpaid interns, or if you plan on starting an intern program, here are four things you may wish to consider to protect yourself from the internship pitfalls.

• Have an agreement or letter making it clear there will be no pay and no guaranteed job.
• Adopt a policy that sets up strict supervision and assigns a mentor.
• Ensure the primary benefit of the intership is for the student, not the employer. For example, minimize assigning the same duties regular employees perform.
• Arrange for a structured program of internal and, if possible, external instruction in the type of work your organization does.

The determination that an unpaid intern is, in fact, an employee can have impact beyond minimum wage and overtime. A misguided classification can lead to problems involving discrimination laws, worker's compensation, state and federal taxes, benefits and unemployment insurance coverage.

Be careful out there!

[Mr. DiLorenzo has practiced labor and employment law for 30 years and is currently the Co-Chair of the Labor And Employment Law Department for the firm of Bond, Schoeneck & King, PLLC]