Just a helping hand? The Potential Pitfalls of Hiring Unpaid Summer Interns | Nexsen Pruet, SARL

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Hot weather and summer are approaching, as is the end of the school year. Therefore, many companies may now or soon be considering hiring a summer intern. Students from various sectors and stages of study are likely to be looking for short-term employment. Employers should be vigilant, however, because even those seeking “unpaid” internships may qualify as “employees” under federal law, and therefore be entitled to minimum wage and overtime pay.

The US Department of Labor (“DOL”) has issued specific guidelines regarding for-profit employers and internships. A company should carefully consider whether its summer interns will be considered “employees” for purposes of federal wage and hour laws, and therefore subject to minimum wage and overtime requirements. The DOL established seven key factors relevant to this determination:

  1. The extent to which the intern and the employer clearly understand that there is no expectation of compensation. Any promise of compensation, express or implied, suggests that the intern is an employee and vice versa.
  2. The extent to which the internship provides training similar to that which would be provided in an educational environment, including clinical training and other practical training provided by educational institutions.
  3. The extent to which the internship is linked to the intern’s formal education program through integrated courses or receipt of academic credit.
  4. The extent to which the internship adapts to the academic commitments of the intern by corresponding to the academic calendar.
  5. The extent to which the duration of the internship is limited to the period during which the internship provides the intern with beneficial learning.
  6. The extent to which the intern’s work complements, rather than replaces, the work of paid employees while providing significant educational benefits to the intern.
  7. The extent to which the intern and the employer understand that the internship is carried out without the right to gainful employment at the end of the internship.

The Fair Labor Standards Act (“FLSA”) requires covered employers to pay employees, including summer interns who do not meet the above seven criteria, minimum wage and overtime pay for hours worked in excess of 40 per week if the employee is not otherwise exempt. such requirements.

The DOL test involves a careful balancing of the seven factors listed above, which unfortunately can lead to uncertainty in the application of the test among employers because no one factor is decisive. Rather, the determination involves a balancing test, with all seven points considered in the totality of the circumstances.

It is important to note that the FLSA provides an exception for individuals, such as summer interns, who volunteer for religious, charitable, civic, and/or humanitarian purposes with nonprofit organizations. In such circumstances, the organization may not be required to pay a summer intern mandatory federal minimum wage and/or overtime. As a general rule, unpaid internships for the public sector and charitable non-profit organizations, where interns volunteer without expectation of pay, are generally permitted.

The recent increased involvement of the DOL in employee classification matters means that employers should exercise caution when hiring summer interns. Nexsen Pruet’s Employment and Labor Law team is available to assist you or your business if questions arise or if additional guidance regarding the correct classification of employees and compliance with federal and state laws on employment and work are necessary.

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