Focus On HR: Understanding the Law for Workers and Internships

By Hedley Lawson
When labs receive requests from students looking for work and internships, many may elect to work without pay for the opportunity to gain valuable experience and to enhance their resumes. For labs, it can be appealing to temporarily employ students. The risks, however, in employing workers and interns may outweigh benefit.

Generally speaking, state and federal laws prohibit the use of free labor, and require companies to comply with minimum wage and overtime laws.

In April 2010, the U.S. Department of Labor (DOL) issued a fact sheet designed specifically to address the employment of interns, with six factors to “help determine whether interns must be paid the minimum wage and overtime under the Fair Labor Standards Act for the services that they provide to ‘for profit’ private sector employers.”

1. The internship, even though it includes actual operation of the facilities of the employer, is similar to training, which would be given in an educational environment.

2. The internship experience 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.

6. The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

The first factor requires employers to manage an internship program like an educational experience similar to what a student might receive in an academic environment or at a vocational school. Given this framework, a lab’s safest option is to associate itself with a local college or university and become approved with course credit. It should also consider creating a syllabus or curriculum for the internship period.

The second factor requires that the program benefit the intern, not the company. This is intended as an educational experience not a work experience. Accordingly, interns should not do rudimentary work, such as delivering mail, stuffing envelopes, answering customer calls, filing, drafting reports or doing research. Some incidental or future benefit to the company may be fine.

The third factor requires that interns not do work that a regular employee would normally be assigned or be hired to do. Interns are not free labor or temporary employees. Essentially, that means no real world experience for interns. A company must also closely supervise the intern. To that end, the interns should receive more supervision than regular employees and should not be assigned independent projects.

The fourth factor requires interns to receive training on general skills for use with many employers and not just specialized skills specific to the company’s operations. This factor also requires that on occasion, the training should interfere with company operations, which seems like an unrealistic and unwelcomed requirement for companies.

The fifth factor requires that the company make clear to the intern that the program is not trial employment or a stepping stone to future employment with the company. Instead, the company should provide a written agreement acknowledging that the program is for a fixed period of time and that the intern is not guaranteed a job at the completion of the program. Management should also make no verbal assurances for any future job.

The sixth and final factor requires that the intern and company clearly state their monetary relationship. A written statement from the company should make clear that the intern is not entitled to any wages during the program and that they are not entitled to any other employee benefit. Any compensation paid to an intern, including stipends, will be closely scrutinized by administrative agencies and courts as appearing to be wages.

Some states have also created other additional intern factors and requirements, which should be carefully reviewed prior to the implementation of any intern program.

Although many companies would like to offer internships as an opportunity to help individuals get some real world experience and possible future employees, it is clear that state and federal laws do not support those goals. The Department of Labor even concedes that the intern exception is “quite narrow.”

Before your lab decides to create an intern program or hire an intern for the summer, cautious consideration should be given to be sure the lab wants to attempt intern compliance with state and federal law. If a lab fails to properly classify an intern and an intern is later determined to be an employee, the lab could be held liable for all unpaid wages, including minimum wage, overtime, liquidated damages, penalties, interest and attorneys’ fees. Also, a lab would be liable for any unpaid employment taxes plus more penalties. Failure to fully comply with the intern requirements could be quite costly.

Unfortunately, even when individuals are willing to work for free as an intern to earn valuable real work experience, the laws do not support that goal. Instead, a company is confined to satisfying legal factors, which are arguably not beneficial to the intern or the company. Consequently, if your lab wants to offer an intern-like program, where individuals receive real work experience, it should strongly consider paying individuals minimum wage and ensure that they do not work any overtime. This essentially eliminates the risk to your lab and can add value to the internship relationship with the intern and the college or vocational school your lab is coordinating the internship.

Hedley Lawson, is the managing partner with Aligned Growth Partners, LLC | Advisors to Boards of Directors and Management. He can be reached at: hlawson@alignedgrowth.com Northern California Office: 707-217-0979 Southern California Office: 714-224-8906

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Labtalk May/June 2018