Right now, many organizations are getting ready for a new class
of interns to arrive in May when schools and colleges finish for
the summer. With fully laudable intentions, many organizations
offer summer internships as a chance to allow students to get their
feet wet in a business or industry, fully recognizing that the
students' contributions and added value, if any, are not that
great.
Experience teaches that many organizations do not pay interns.
However, this is often a risky proposition. Under the Fair Labor
Standards Act, the legal standard to qualify as an unpaid
internship is actually quite high. The consequence of failing to
meet that legal standard—and in our experience many may
not—is that the "intern" is deemed to be a
misclassified employee, and would be entitled to be paid minimum
wage and overtime for all of the hours worked as an unpaid
intern.
This exposure, including liquidated (i.e., double)
damages and potential penalties and attorneys' fees, can be
significant. In addition, there could be tax exposure for any
unpaid employment taxes and withholdings that were not made because
the wages that should have paid were not.
So, if you are considering an unpaid internship program this
summer, take the time to ensure it is legally compliant. For those
that want to take a closer look at their internship programs, our
Client Alert on this issue provides a detailed summary of the
compliance issues and risks, and practical tips for employers. The
Client Alert can be found here.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
