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Legal Issues For Companies With Internship Programs

Do we have to pay our interns (For-Profit Corporations)?
It depends.

Employers often have legal questions about how to hire an intern, especially about whether to hire paid or unpaid interns. While hiring interns, employers should look up the federal Fair Labor Standards Act (“FLSA”), which is the federal wage and hour law that sets forth the legal requirements for compensation for employees, including paid interns, minimum wage and overtime pay. In addition, most states including New York have their own laws regarding pay, which oftentimes closely track the FLSA. In both the federal and state context, wage and hour laws apply only to “employees”. Thus, to determine whether an intern is entitled to compensation under the FLSA, it must be determined whether the intern is an employee for purposes of the FLSA. In the “for-profit” private sector, it is difficult to establish that an intern is not an employee. The core issue around compensation while hiring an intern is whether the internship program is primarily benefiting the student or the employer.

To be considered an unpaid intern, the student intern, and not the employer, should be receiving the primary benefit of the relationship.

Do we have to pay our interns (Non-Profit Corporations)?
Generally, no.

The Department of Labor (“DOL”) has stated that unpaid internships in the public sector at non-profit charitable organizations, where the intern volunteers without expectation of compensation, are generally permissible. Interns are considered “volunteers” if they give their time freely and without anticipation of compensation for religious, charitable, civic, or humanitarian purposes to non-profit organizations. In general, in the non-profit sector, an intern can be unpaid if he or she is performing volunteer services with no expectation of being paid and in support of the goal or mission of the non-profit.

If we do have to pay our interns, should they be classified as exempt or non exempt employees?
It depends.

The FLSA provides that employees who work more than forty hours in a week must be paid for the excess hours at one and one-half times the regular rate of pay. With an internship program like this, this includes interns who are also considered employees under the FLSA. Some employees are exempt from this requirement of the FLSA.

Generally, it is difficult to establish that an intern is exempt from overtime because interns do not exercise “discretion and independent judgment” in performing their job duties, which is the critical requirement to be exempt.

Is there a max number of hours (per day/week) that an intern can work?
Generally, no.

The FLSA does not establish a maximum number of hours that an employee (including employee-interns) can work per week for interns over the age of 18. However, if it is a paid internship and the employee works over 40 hours per week, (s)he must be paid time and a half for those hours worked in excess of 40 unless (s)he qualifies for an overtime exemption. State laws vary on the maximum amount an employee may work each day or each week before (s)he qualifies for overtime in respect to their internship salary.

Can school credits replace payment for an intern?

Internship salary requirements: If the intern qualifies as an “employee” for purposes of the FLSA, (s)he must be paid in accordance with the Act, whether or not the intern receives school credits.

Do we have to provide vacation to interns? Is there a minimum number of vacation days we need to give them?
Generally, no.

When hiring interns, the FLSA does not require employers to provide employees, including employee-interns, any amount of vacation. Some state or local laws require that employee-interns receive paid sick days, depending on the location of the work and the length of time of the internship.

How many interns can we employ once?
As many as you like.

Federal law (including the FLSA) does not regulate the number of interns a company may employ per internship program.

Is an intern an independent contractor?
It is unlikely that an intern would be considered an independent contractor.

An independent contractor is not an employee and thus, is not subject to the provisions of the FLSA. Independent contractors are typically workers with economic independence who are in business for themselves as opposed to employees who are workers who are economically dependent on the business of the employer. Courts consider several factors to determine whether a worker is an employee or an independent contractor for purposes of the FLSA. Interns, however, are unlikely to be considered independent contractors as they are not usually workers who are in business for themselves—they are generally students at paid internships or unpaid internships.

Do I have to give interns benefits?
It depends.

If the intern is deemed to be an employee, then the employee may be eligible for certain benefits under federal law, including up to 12 weeks of unpaid leave per year under the Family Medical Leave Act. It can depend on your internship program - if the intern is not deemed to be an employee, then benefits are not required to be provided.

Practical Issues for Companies with Internship Programs

What are my responsibilities concerning an intern who might want school credit for his or her internship?
While not obligated to determine how the intern can obtain school credit, once the intern discloses the requirements, the company should ensure that the intern can meet those requirements.

Each school and internship program will have its own requirements for a student who is looking to get credit for the internship instead of an internship salary. The company should ensure that any student intern who is seeking school credit presents that information to the company and sets forth the expectations of the school so that the company can ensure that it is providing the student with the required training and experience that will allow the student to get the credit versus providing a paid internship. For unpaid interns in the for-profit setting, it is a best practice to require the intern to provide proof of enrollment in a course or internship program that will allow that student to get credits.

When do most summer internships typically start?
Within 1 to 2 weeks following Memorial Day.
What is the market wage rate/compensation for an intern?
It depends.

Compensation for paid internships varies widely across geographic markets and industry. For example, in some industries, the interns are paid at the same rate that the company pays to entry level employees upon graduation. In other settings, the interns are paid at the applicable minimum wage rate.

What is the expectation that the company review the intern's performance?
A company's obligation to review the intern's performance, and how that review is to be conducted, will depend in part on the school's requirements.

In any given internship program, a company should seek to provide appropriate tasks and a review of those tasks to all interns, and in particular ensure that the interns getting school credit for the internship are getting reviewed in a way that will support the student’s credit requirements.

How much training should I provide my intern?
It depends.

Like any other employee or volunteer, interns need to receive enough training so they can successfully meet your expectations. For unpaid interns, and, particularly those receiving school credit, the expectation to provide training is heightened as the internship program is intended to act as a supplement to classroom study.

How much exposure to the whole business is expected for an internship?
It depends.

Consistent with the requirement that an unpaid internship is primarily for the benefit of the intern, and not the company. Within an internship program, a company should provide internship guidelines and opportunities for an intern to learn about the entire business and not just to prepare him or her to perform a narrow job function.

Can students work for multiple companies at one time?

Student interns might seek the opportunity to participate in multiple internship programs at the same time. Lots of companies are getting more involved in college recruiting when it comes to hiring interns. Companies, however, have a right to (1) ensure that their proprietary, confidential and trade secret information will not be shared with any other company, and (2) the intern is satisfying the expectations set by the company.

How many hours per week do interns expect to work during the school year?
It varies.

Companies should discuss this question with each individual intern to determine a reasonable number of working hours that will satisfy the credit requirements of the school if school credit is being sought and will otherwise be productive for both the company and the intern. For example, even if it is a paid internship, the company and the intern should determine a schedule that will not interfere with school studies to ensure that the intern can perform his or her best for the company.

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