Memorial Day begins the unofficial start of summer—which means that employers across the country are gearing up for a new group of summer interns. Energetic high school, college and graduate school students are eager to gain both a first look at and practical experience in their chosen fields of study.
The Compliance Challenge
The use of summer interns in the private sector, for-profit world has been a compliance challenge for employers in recent years under the Fair Labor Standards Act. High-profile litigation in the entertainment industry, coupled with the restrictive position taken by the prior administration’s Department of Labor, significantly curtailed the prospects of securing an unpaid internship without running afoul of the FLSA’s minimum wage and overtime requirements.
New Guidance on the Intern Test
A new day may be here for employers looking to provide educational and career experience to interns, however, and summer 2018 will likely see a return to the increased use of unpaid summer interns. As is often the case with the FLSA (and with life), when one door closes another opens. In January 2018, the Department of Labor updated its guidance on the test for unpaid interns and students to align the agency’s position with recent court decisions. The new DOL test is comprised of seven factors which are designed to identify whether the employer or the intern is the “primary beneficiary.” In those situations where the intern, as opposed to the employer, primarily benefits from the working relationship, then the intern does not have to be paid as an employee under the FLSA. Multiple factors in the new test are geared toward education, including:
- The extent to which the internship provides training that would be similar to training given in an educational environment, including the clinical and other hands-on training provided by educational institutions;
- The extent to which the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit; and
- The extent to which the intern’s work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern.
Best Practices to Ensure Compliance
While the DOL’s new criteria certainly are less restrictive, they are simultaneously more subjective. So, employers have potentially traded one compliance issue for another. To navigate these new waters, now is a good time to review internship recruiting and hiring practices with a critical eye toward ensuring that interns are receiving educational or practical training benefits from your program. A few best practices to ensure compliance with the Department of Labor’s 2018 guidance include the following:
- Institute a formalized, structured program for recruiting and hiring summer interns. This will decrease the likelihood that individual managers who may may want to help out a family member, colleague, or client run afoul of the rules. Informal internship or shadowing arrangements, while beneficial, may not comply with either the FLSA’s intern requirements nor the employer’s program objectives.
- Clearly communicate to interns in writing the scope, requirements, and opportunities of your program—including both that the internship is 100% unpaid and that the intern should have no expectation of a job within your organization at the conclusion of the internship.
- Once they arrive, rotate interns through various departments within your organization. Rotation enables an intern to gain knowledge and practical experience in multiple facets of the organization in a relatively short period of time and provides the intern with the ability to evaluate and compare different potential areas of career focus. Regular rotation will also ensure that intern does not become integrated into the business environment (rather than the educational environment).
- For this same reason, internships should be limited to the summer or a corresponding time period on the intern’s academic calendar. Limiting the time period of any internship will assist in ensuring that interns do not become essential, productive team members whose primary benefit swings in favor of your organization rather than the intern.
- Ties to the intern’s educational institution remain an active cornerstone of any internship program. If the intern receives academic credit for completing the internship, this is great. Consider including a requirement that each intern prepare a written report on their activities for purposes of reporting back to their educational institutions.
- Strongly consider a mentor relationship for any internship program. The knowledge imparted by experienced professionals in the intern’s field of study will prove invaluable both in providing the intern with “real world” experience and in providing your employees with a chance to evaluate whether the intern has a career path with your organization.
While interns do not generate revenue or productive work in the short-term, there are still business benefits derived from creating a formal internship program. This program can be a critical tool to aid employers in succession planning, diversity programs, brand recognition and even community involvement. But employers must follow the rules, and it’s always a good idea for an experienced labor and employment attorney to review a company’s policy on interns to make sure you stay in compliance as those rules evolve.
Jennifer T. Williams is a member of Cozen O’Connor in Miami. She has represented management in labor and employment law for more than 15 years.