6 keys to keeping unpaid internships from becoming a hot wage & hour mess

Yesterday, I presented “Reducing the Risk of Wage and Hour Litigation” with my partner, Jennifer Platzkere Snyder, at ALM’s In-House Counsel Labor and Employment Law Forum. We talked best practices, common mistakes, and Supreme Court.

We also dipped into some hot issues, the hottest of which, by far, based on audience engagement, was unpaid internships. Oh boy, is it easy for companies to potentially screw up unpaid internships. Just ask Charlie Rose and Harper’s Bazaar.

Want to get ’em right without running afoul of the Fair Labor Standards Act. Six steps to success follow after the jump…

* * *

Generally, individuals who are “suffered or permitted” to work must be compensated under the law for the services they perform for an employer. Under federal law, the compensation must be at least $7.25 per hour. Plus, if the employee is non-exempt, the employee must be paid OT (time and a half) for all hours worked over 40 in a workweek.

But…

There is an exception for internships and training programs. Yes, you too can have free labor under the FLSA, provided that six criteria are met:

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;

The internship experience is for the benefit of the intern;

The intern does not displace regular employees, but works under close supervision of existing staff;

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;

The intern is not necessarily entitled to a job at the conclusion of the internship; and

The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

If all of the factors listed above are met, an employment relationship does not exist under the FLSA, and minimum wage and overtime provisions will not apply. However, violate any one of them, or any of the more restrictive state laws that may exist where you have interns — NJ, for example, has a nine-factor trainee test — and it will be a cruel summer.

You can find more information on this subject in Fact Sheet #71: Internship Programs Under The Fair Labor Standards Act.