Although our zany Michigan weather might not always reflect it, summer is on the horizon. Personally you may be looking forward to outdoor dining, Tigers games, weddings, and vacations. However, professionally the summer may be a time for your startup to hire an intern. As a result, you may have already promised your best friend’s cousin’s boyfriend’s little sister an awesome opportunity to bolster her resume and provide you with some much-needed assistance. This will likely be a win-win for the involved parties – unless the government gets involved.
If you opt to pay your intern then you need to insure that her compensation complies with federal and state minimum wage requirements. But if you are still a growing for-profit company you likely can only afford to compensate your intern with priceless work experience and/or academic credit or in other words – no cash. Therefore, your unpaid internship must comply with the six criteria implemented by the US Department of Labor (DOL), under the Fair Labor Standards Act (FLSA), to receive a wage exemption:
- The training is similar to what a student might experience in a vocational school, even though taking place at the employer’s facilities
- The training is for the benefit of the student
- The student works under direct supervision of a regular employee and does not displace a regular employee
- The employer provides training and derives no immediate advantage from the activities of the student
- The student is not entitled to a job at the end of the training period
- The employer and the student both agree that the student is not entitled to wages for the training
These criteria are quite strict, to say the least, particularly #4. From personal experience, I am almost positive that most unpaid internships do not meet these requirements. Whether it is due to fear, being unaware of their rights, or grateful for the opportunity a majority of interns do not report a company’s failure to satisfy these requirements.
However, there have been a few brave intern souls who are suing company’s for improperly obtaining a wage exemption. Therefore, the DOL has become more serious about protecting interns to ensure that companies are not unfairly taking advantage of them.
So what can you do besides forgoing an intern or paying one with monies that your company does not have? For starters, you will need to design an internship program with these factors in mind and in close partnership your HR and/or legal counsel. Additionally, you will need to formalize the internship relationship with an agreement that details each of these factors and how your company and the intern will meet them. Failing to meet the DOL’s requirements for unpaid internships can make your company liable for violations of federal and state labor law plus fines and legal fees. This type of legal trouble could unfortunately result in you looking for your very own internship next summer.
Photo via Pikaland.