Hiring interns may seem like a brilliant way to benefit your small business. By setting up an effective intern program, you can spot talent, get fresh perspectives, and save money on recruitment costs. The interns also benefit by gaining real-world experience and improving their resumes. But, when does a small business have to pay interns? Small business owners should be aware that the U.S. Department of Labor requires businesses to meet certain criteria (as outlined in the Fair Labor Standards Act) regarding internships. Failing to meet these standards can expose employers to class action lawsuits and high legal costs.
According to the Fair Labor Standards Act, internships in the for-profit sector should meet the following six criteria:
- The internship should be similar to training that would be given in an educational environment. In other words, the training should be centered on the intern’s field of study rather than your specific business operations.
- The internship experience should be for the benefit of the intern—not your business. Skills learned in the program should transfer to other opportunities.
- The intern should not displace regular employees but work under close supervision of existing staff. Generally, interns can be unpaid if they are primarily shadowing you or other employees while performing minimal work.
- You should derive no immediate advantage from the intern’s activities, and on occasion, your operations may actually be impeded by their presence.
- The intern is not necessarily entitled to a job at the conclusion of the internship. The Labor Department frowns upon this type of arrangement because it may lure employees to work for free in exchange for the promise of future payment.
- The employer and the intern understand that the intern is not entitled to wages for the intern’s time.
If the business fails to meet even one of these requirements, it could be held responsible for back pay and crippling legal fees. If a court determines that the business willfully violated the law, they can look back three full years in awarding back pay.
Certain industries, particularly creative industries like film, web or magazine publishing, have a reputation for offering hard-working unpaid internships. Employers in these fields may be targets for class action attorneys who receive complaints.
If you pay all your interns at least minimum wage, and overtime wages if applicable, you should be protected against these risks. For additional information on the six criteria for internships, visit the United States Department of Labor’s website here: http://www.dol.gov/whd/regs/compliance/whdfs71.htm
Brooklyn Business Lawyer Regina Gordon Counsels Small Businesses on Internship Programs
If you have an internship program, or are considering establishing one, make sure that your plan complies with the Fair Labor Standards Act. At Regina Gordon Law Office, we love to see our small business clients excel. We serve clients online throughout New York State, including Long Island, New York City (NYC), Brooklyn, Manhattan, Queens, Bronx and Staten Island. To discuss your goals, contact us at 347-770-7507 or submit an online inquiry today.