Complex issues may arise for companies desiring interns

Posted by Charles Middleton on 04/05/2018

Q: Do companies need to pay summer interns?

A: Maybe. An intern always can be paid minimum wage or more. The more complex issue arises for those organizations desiring an unpaid internship program. In interpreting the Fair Labor Standards Act (FLSA), the United States Department of Labor (USDOL) utilizes a “primary beneficiary test” to determine whether an intern in the for-profit sector qualifies to be exempt from the FLSA's minimum wage and overtime provisions. In January, the USDOL implemented this more streamlined rule than that applied in the past. Under this updated guidance, seven factors need to be weighed to identify the primary beneficiary in determining whether an employment relationship with an intern or student exists: clear understanding to the intern that the internship is unpaid; the internship provides training that would be given in an educational environment; the intern's completion of the program entitles him or her to academic credit; the internship corresponds to the academic calendar; the duration of the internship is limited to period of “learning;" the intern complements rather than displaces the work of regular employees; and there is a clear understanding that there is no guarantee of paid, full-time employment at the internship's end. These seven factors aren't an exhaustive list, and need to be weighed all together in determining whether your organization's internship can qualify as an unpaid program. No single factor is a determinate. This new guidance also states that unpaid internships are generally permissible at nonprofit charitable organizations, religious organizations, and civic/humanitarian organizations. Oklahoma law follows the federal wage and hour law requirements, so as an employer in Oklahoma, you must follow this new USDOL guidance.

Q: Does the intern need to sign any sort of agreement?

A: Yes. All interns should sign an agreement clearly explaining the terms of the program. The agreement should set forth the following: whether the intern is an “employee” or not; whether the internship is paid or not; a description of the work, experience, exposure, teaching, mentorship, etc. provided to the intern; duration of the internship and whether it is tied to a school program or credit; and that there's no guarantee of future employment.

Q: If the internship is unpaid, do employee policies apply to the summer intern?

A: No, unless you purposefully want to create an employment relationship. But you can create special policies and/or contracts that apply specifically to unpaid interns. For instance, your company can have an anti-harassment/anti-discrimination policy, safety/workplace violence policy, and a mandatory arbitration policy that applies specifically to interns.

Q: What kinds of potential legal claims do I need to consider with legal interns?

A: If an intern is paid, and therefore is an employee, he or she may be able to assert a claim against your company under Title VII (prohibiting discrimination based on race, color, sex, religion, or national origin) or the ADA (Americans with Disabilities Act), for instance. There may be workers' compensation implications if an intern is injured while on the job. Furthermore, if the intern is paid, he or she could bring a wage and hour claim against your company as well. A claim can be brought against your company, based upon your intern's conduct if the intern is perceived as your “agent.” Therefore, in order to avoid this vicarious liability for unpaid interns, be mindful of whether the intern is wearing an employee uniform reflecting your company's name, or is driving a company car, or is carrying a company bag, and things of that nature. Simply because their title is “intern” isn't sufficient to dispute a reasonable belief that the unpaid intern is acting as your agent. Be cautious about ratifying the intern's conduct or treating the intern as your agent. Also, be cautious of how the interns are utilized and provide careful supervision over the intern's assigned duties and activities.

Q: Should I review my company's or organization's internship program?

A: Absolutely. Review how your internship program is set up and how it's advertised. Ensure your organization or company is consistent across paper materials and what the website reflects regarding unpaid versus paid internships, school credit, and structure of the program. Make sure costs, fees, pay and duties are clearly stated. Update your recruiting materials if they're out of date. Revise or draft the agreements or policies you specifically want to apply to your interns.


Published The Oklahoman, April 5, 2018