Employers beware misclassifying employees as unpaid interns

With the spring semester over, thousands of college students in the Commonwealth are flooding the job market seeking practical experience to bolster their resumes. With the downturned economy, many students are competing to obtain offers from top employers—as unpaid interns.

While this trend provides employers with “cheap labor” and provides students with the requisite skills they need to compete in the competitive job market, employers beware. The unpaid intern you believe is saving your company money may actually increase your company’s liability.

In April of 2010, noticing an upward trend in the use of unpaid interns, the Department of Labor issued “Factsheet #71.” This factsheet sets forth standards for determining whether an intern is an employee for purposes of the Fair Labor Standards Act (FLSA.)

Analysis under this factsheet is crucial because, depending on the result, your unpaid intern may be owed minimum wage and even overtime under the FLSA. In fact, “intern” in the “for-profit” setting will almost always be defined as an employee unless careful and deliberate precautions are taken. 

The Unpaid Intern Test 

In making the determination as to whether your unpaid intern is owed pay, Factsheet 71 sets forth a 6-pronged test. Unless the test described below relating to trainees is met, interns will qualify as employees for the purposes of the FLSA.

1. The internship, even though it includes actual operation of the facilities of the employer, is similar to training which would be given in an educational environment
2. The internship experience is for the benefit of the intern
3. The intern does not displace regular employees, but works under close supervision of existing staff
4. The employer that provides the training derives no immediate advantage from the activities of the intern; and on occasion its operations may actually be impeded
5. The intern is not necessarily entitled to a job at the conclusion of the internship
6. The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

Employer Precautions

While there is an increasing trend in wage and hour litigation for unpaid interns, there are easy precautions that you, as an employer, can take.

• Be cautious about who you seek as an unpaid intern
• Do not lead interns to believe they may potentially be hired
• Document the impact of educational training the intern program has on your company
• Set out terms at the beginning by contract, including the duration and activities the intern will partake in.

By following these precautions and adhering to the 6-pronged test established by the Department of Labor, it is likely that you will limit liability based on your company’s use of unpaid interns. 

 

Image credit: NASA Goddard Space Flight Center