Summer Interns: Paid or Unpaid? Getting it Right

Summer is here and students are looking for jobs. Some may even offer to work for no pay just to get job experience to put on their résumés. As employers, we know that internships offer students opportunities to gain real-world experience, make business contacts, identify career interests, and gain an edge in an increasingly competitive job market.

We also know that hiring interns gives our own businesses access to highly motivated and educated young workers who can help get work done while we gain new insights into what younger consumers value for marketing our products and services. The practice also allows our junior managers to gain more experience training and supervising these workers.

This seems like a perfect solution for both intern and employer, especially if it is low- or no-budget, right? If the internship meets certain criteria, such as when the employer provides specific vocational training that could be eligible for college credits during the internship, it is a great solution. If the internship does not meet that criteria, however, there are potential legal and administrative pitfalls that many employers overlook. By identifying and managing these risks, you can help avoid liability, employee relations issues, and administrative hassles when hiring interns at any time of the year.

Consider the Pay Issue Carefully

According to the National Association of Colleges and Employers Class of 2016 Student Survey Report, 56 percent of 2016 graduating seniors had internships in the for-profit, private sector, which is governed by the federal Fair Labor Standards Act (FLSA) regulations. The FLSA sets standards relating to pay practices, and government enforcement efforts have increased regarding ensuring that unpaid internships meet the criteria for exemption from pay. Many experts advise that employers in for-profit businesses should pay interns at least the minimum wage to avoid potential scrutiny.

Even within higher education where programs are evaluated based upon the success rate of placing students with jobs where internships boost placement rates, career services professionals say students should be paid at least minimum wage. Others suggest that not paying students for their labor is an ethics issue. After all, they are working alongside regular employees—often doing some of the same tasks—and not being compensated for that work. This may even send the message to regular full-time employees that their work, or time, is not valued. Further, customers or the community may view the employer as taking advantage of these students.

Among the issues surrounding internships is whether the FLSA even applies to interns. The FLSA does not define “intern,” nor does it provide an exemption from minimum wage or overtime for them. Most HR and legal practitioners, however, take the view that an intern is defined as a professional in training, and employers using an intern’s services should adhere to the standards set forth under the FLSA.

If you are struggling to decide whether to pay interns, review the following FLSA requirements (generally considered the FLSA “six-factor test”) to determine whether the training provided meets the “learner/trainee” rules:

  • The training must be comparable to that given at a vocational school (for example, the intern could pay to receive the training somewhere else).

  • The training must benefit the student.

  • The student would not replace a regular employee (the intern cannot fill in for someone on a short-term disability or out for the day).

  • The employer does not immediately benefit from the student’s activities. (This requirement is especially troublesome for employers because the company does expect to receive a benefit from the intern’s labors. Practically, this means the intern cannot deliver mail, sort files, file papers, organize a person’s calendar, conduct market research, write reports, schedule interviews or do any other job that assists the employer in any way in running their business). 

  • There is no promise of a job following the training.

  • Both the employer and the student understand that no wages will be given for the training period.

The Department of Labor fact sheet regarding student interns has more detailed information on this topic, and states may have additional conditions that employers must satisfy.

When in doubt, pay the student. In addition to the government enforcement efforts, students are more aware of the issue, and there are an increasing number of lawsuits filed by unpaid interns claiming back wages and possible overtime under both the federal FLSA and state laws. If you are uncertain how much to pay interns, you can consult with your local high school or college placement center where counselors may be able to give you some direction on what other employers in your area are paying. Pay levels for internships are typically determined by a student’s year in school and field of work.

Hiring summer students is a great way to help youth in your community learn what it takes to be successful in business while helping employers get special projects completed. Plan carefully and do your homework so that the summer internship program is a great experience for everyone.

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