This summer, more than 2.5 million students are expected to work as interns—most of them unpaid. Internships have become a critical step on the road to successful job placement for many college students, giving them professional experience in furtherance of their education.
They also promote valuable business interests such as promoting the image of a business in the local community, providing the opportunity to evaluate potential job applicants and sometimes performing important work that might not otherwise get done.
A for-profit business runs significant legal risks by agreeing to take on an intern, and companies should be aware of how those risks can be minimized.
Employee Status?
Unpaid interns may acquire the status of "employees" under the wage and hour laws and may be entitled to be paid at least the minimum wage and overtime for working more than 40 hours in a week.
Under the federal Fair Labor Standards Act, there are six tests that must each be met so that a student intern will not be considered to be an employee:
- The intern must receive training similar to that which the student would get in school, even if it means actually operating the employer's facilities;
- The training must be for the benefit of the trainee—not the employer;
- The intern must not displace a regular employee, but must work under close supervision;
- The employer hosting the intern must derive no immediate advantage from the activities of the trainee and, on occasion, the employer's operations may actually be impeded;
- The intern must not necessarily be entitled to a job at the completion of the training period; and
- The employer and the intern must understand that the intern is not entitled to any wages for the time spent in training.
For almost 60 years the Department of Labor has consistently applied these factors to determine if a student intern should be classified as an employee. In each case, the determination rests on all the facts and circumstances. That is why it helps an employer significantly to have a written description of the internship program that spells out how each of these criteria is met.
Of course, compliance with federal wage and hour laws is only one step. If any state or local laws impose a higher obligation on the business, then the employer must comply with them as well.
Child Labor Restrictions
The Fair Labor Standards Act also contains restrictions on the employment of youth. Some work is prohibited because it is deemed to be hazardous such as operating certain types of power equipment. But even driving a motor vehicle is deemed to be hazardous for those under age 18. There are also hours of work protections for students under age 16. The Department of Labor maintains a useful website (http://www.dol.gov/elaws/esa/flsa/cl/default.htm) that can guide employers through many of the basic questions they may have. But as with the minimum wage laws, care must be taken to ensure compliance with any more stringent state or local law requirements.
Liability for Injuries
Through their program of compulsory workers' compensation insurance coverage, every state provides some form of immunity from tort liability for employers whose workers suffer an injury in the course of their employment. Some states extend this immunity to cover loaned employees or individuals whose services are provided through temporary help agencies. So, what about student interns?
The test of who is an employee may not be the same under the state wage and hour laws as it is for workers' compensation purposes. In New York, for example, a student intern providing services to a for-profit business, a nonprofit or a government entity is generally considered to be an employee of the organization and is covered by the workers' compensation policy even if the intern is unpaid. On the other hand, student interns, whether paid or unpaid, providing non-manual services to a religious, charitable or educational institution are exempt from the mandatory coverage of the New York workers' compensation statute. In Florida, however, a court ruled that a student intern was not covered for workers' compensation benefits when the internship was required for graduation.
If the student will be deemed to be covered by the workers' compensation law, then the employer normally has an obligation to provide notice of coverage and any limitations that might apply, such as the obligation to seek initial medical care from a designated group of providers. It is therefore advisable to determine at the outset how a student intern will be classified in your state and what additional obligations must be met.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
