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Internship Guide

 

The Employer’s Legal Guide To Student Internships


Student internships demonstrate an important symbiotic relationship between educational institutions, students and employers. However, the legal context of student internships is seldom discussed. While the risk associated with use of interns is quite low, it can be reduced even further by some preparation. Here is brief primer.

Paid Internships

The opening question is whether the internship will be paid or unpaid. If paid, the legal context is greatly simplified: the individual is simply a temporary and/or part time employee. Employers should clarify in a written off­er or communication to the intern the limited length and hours of the internship, especially since “full-time regular” employment may require the payment of fringe benefits under existing policies and ERISA benefit plans.

Because any monetary payment establishes an employment relationship, minimum wage must be paid (Federal: $7.25 per hour; Michigan: $8.14) with overtime paid for hours worked over 40.

State and federal discrimination, harassment and other employment laws also apply. Accordingly, an express limit on the length and hours of the internship also caps wage loss damages and thus reduces any litigation risk posed by interns.
 

Unpaid Internships

The Fair Labor Standards Act (“FLSA”) defines the term “employ” broadly to include “suffering or permitting” one to work, and requires that all employees be paid minimum wage and overtime. Therefore, unpaid internships should be established with some planning, especially since class action suits by interns have become popular.  (The following entities settled suits by interns for the following amounts in 2012-2015:  PBS commentator  Charlie Rose ($250, 000 + $50,000 in legal fees); Conde Nast ($5.8 million for approximately 7,500 former interns dating to June 2007); NBC Universal ($6.4 million); Viacom/MTV Networks $7.2 million.

Until 2015, no court had ruled on whether unpaid interns qualified as employees, so that they must be paid wages.  However, Courts have long recognized that individuals may be unpaid “volunteers” in order to receive training in analogous contexts. The U.S. Department of Labor (“DOL”) has issued a fact sheet entitled “Internship Programs Under The [FLSA]” which identifies six criteria for when internships may be unpaid: The internship is for the benefit of the intern.

  1. Even though the internship includes actual operation of the facilities of the employer, it is similar to training which would be given in an educational environment.
  2. The internship is for the benefit of the intern.
  3. The intern does not displace regular employees, but works under close supervision of existing staff­.
  4. 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.
  5. The Intern is not necessarily entitled to a job at the conclusion of the internship; and
  6. The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.
However, the 6th Circuit Court of Appeals, which decides federal law for Michigan, has stated in a non-intern case that #4 of the DOL’s criteria is “overly rigid” and instead simply focuses on whether the intern or the employer received the “primary benefit” from the relationship. Then, in 2015, an “intern” case reached the 2nd Circuit Court of Appeals (New York), which other courts consider very influential. Glatt v. Fox Searchlight Pictures, Inc., (2d Cir., July 2, 2015) likewise held that DOL criteria #4 is overbroad, and instead suggested the following as factors to be considered when dealing with interns:

  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 that would be similar to that which would be given in an educational environment, including the clinical and other hands-on training provided by educational institutions.
  3. The extent to which the internship is tied to the intern's formal education program by integrated coursework or the receipt of academic credit.
  4. The extent to which the internship accommodates the intern's academic commitments by corresponding to the academic calendar.
  5. The extent to which the internship's duration is limited to the period in which the internship provides the intern with beneficial learning.
  6. 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.
  7. The extent to which the intern and the employer understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship.

The DOL’s criteria does not distinguish between profit/non-profit employers, but the DOL has stated that “internships in the ‘for-profit’ private sector will most often be viewed as employment,” unless the DOL’s criteria above is met.

Employers can document that unpaid internships meet the 2nd and 6th Circuits’ “primary bene­fit” test:

  • Accept and orient to any materials provided by the school’s internship program and establish a relationship between HR and the program counselor.
  • Appoint one member of the HR team to acclimate to school guidelines, and coordinate compliance with managers who will be interacting with interns.
  • Adopt an intern intake, application or orientation form which:
            a. Acknowledges that the internship is unpaid, possibly for credit and that the intern is volunteering his time in order to gain
                experience and that a job is not guaranteed by participation;
            b. Establishes the length and hours of the internship, with a reminder that the internship can be ended at the will of the
                company, if necessary;
            c. Includes a checklist of the many ways that the intern will benefit. - Often, the college requires some report. Some “wrap-up”
                should be done. Go through the checklist of expected benefits on the intake form and ask about and record the intern’s
                experiences.  These “scorecards” will be valuable to show the primarily benefit to interns if any wage claim is ever made.

EEOC Guidelines

Finally, “volunteer” status does not necessarily mean that an unpaid intern is beyond the protection of discrimination laws, which focus on the “economic realities” of the relationship, where “remuneration” is only one factor. EEOC guidelines say that a volunteer may be considered an employee if the volunteer is covered by workers compensation, and most policies would likely cover interns.  The fact that internships are unpaid and of limited duration means that harassment presents the biggest risk of EEO liability. Most companies would protect interns from harassment in the same manner as employees. Accordingly, interns should sign for a copy of the harassment policy and complaint procedure.

Information courtesy of Pilchak & Cohen,, P.C.  For  more information, contact:

William Pilchak
248-409-1900
wpilchak@mi-worklaw.com