Interns for the Bureau of Land Management
As summer approaches, many businesses will hire interns. Many, including PR and marketing agencies, may not pay the interns and expose themselves to massive liability as well as reputational damage. Businesses must pay interns at least minimum wage unless they meet Department of Labor (DOL) guidelines. Recruiting unpaid interns to make coffee and run errors would be a dangerous mistake.
New DOL guidelines issued in January eased requirements for employees, at least marginally. The guidelines set a seven-point primary beneficiary test to determine if interns should be paid. The department terminated an earlier provision that forbid employers from gaining “immediate advantage from the activities of the intern.” In addition, internships don’t have meet specific thresholds on all the factors. Overall internships are evaluated.
Internships are Meant to Provide Training
To summarize, the DOL expects unpaid internships to provide training and education much like an academic environment. The new test includes consideration of the extent to which:
- Both parties understand that the intern is not entitled to compensation.
- The internship provides training that would be given in an educational environment.
- The intern’s completion of the program entitles him or her to academic credit.
- The internship corresponds with the academic calendar.
- The internship’s duration is limited to the period when the internship educates the intern.
- The intern’s work complements rather than displaces the work of paid employees while providing significant educational benefits.
- The intern is not promised a paid job after internship.
Legal experts disagree over whether the new test will prompt a surge in unpaid internships. “You could say working in the industry, even if you’re doing relatively mundane tasks, gives you some knowledge of how the industry works,” Patricia Smith, senior council at the National Employment Law Project, told Bloomberg. Others foresee no increase in unpaid internships.
Severe Penalties for not Paying Interns
Given the severe penalties for violating the guidelines, employers would be well advised not to take chances. Potential penalties include back pay, state and federal taxes not withheld, workers’ compensation contributions, unemployment insurance and benefits, punitive damages, interest, and attorneys’ fees and costs, according to Justworks, an HR and compliance firm. Class action lawsuits can magnify the damage. Then there’s also the risk of a public relations crisis and reputational damage. In the past, some unpaid interns have sued for pay after their internship.
Companies must pay interns at least minimum wage and overtime pay (1.5 times regular pay for over 40 hours in a week) and meet other requirements of the Fair Labor Standards Act, Justworks states in its ebook Legal Considerations for Recruiting and Hiring Interns. Employers must also meet state minimum wage requirements and state and local overtime pay laws, which vary and may be higher and stricter than federal rules.
Nonprofit organizations and public agencies can legally hire interns as volunteers. To mitigate risks, businesses can coordinate the internship with a bona fide educational institution and provide interns academic credit. Internships still need to meet the primary beneficiary test. If there’s doubt, pay interns minimum wage and overtime. Or don’t hire interns.
Tips for Recruiting Interns
Hiring interns also poses legal pitfalls. Justworks recommends:
- Create a hiring process that resembles the process for hiring employees as much as possible.
- Never promise a paid position once the internship is complete. That can jeopardize the intern’s legal status.
- Set clear ground rules and expectations in advance. Be clear on any compensation, school credit, supervisors, schedules, and selection and performance criteria.
- Cover interns under the organization’s worker’s compensation policy to limit liability exposure.
Bottom Line: Although new guidelines provide employers more flexibility, hiring unpaid interns still presents enormous financial and PR risks. Understanding the rules will help businesses avoid severe monetary and reputational damages. Essentially, government guidelines view interns as trainees and students, not employees.
William J. Comcowich founded and served as CEO of CyberAlert LLC, the predecessor of Glean.info. He is currently serving as Interim CEO and member of the Board of Directors. Glean.info provides customized media monitoring, media measurement and analytics solutions across all types of traditional and social media.
