Lawsuits by unpaid interns are changing the landscape

Hiring someone for a paid or unpaid internship may seem like a great solution for businesses needing extra talent during vacation season. But, if not handled appropriately, it can be riddled with problems and risks.

“Just because you have an extra cubicle or computer doesn’t mean you’re ready to hire an intern,” said Roy Tyson, worldwide deputy employment practices and fiduciary product manager for the Chubb Group of Insurance Companies. “Before you bring an intern on board, make sure your company has a formal internship plan and that it complies with federal and state regulations.”

Unpaid internships offered by for-profit companies are subject to the U.S. Department of Labor’s Fair Labor Standards Act (FLSA), which establishes minimum wage and overtime standards. However, for-profit company internship programs that offer an educational experience for the benefit of the intern may be exempt from FLSA regulations under a “trainee” exception. Unpaid internships offered by non-profits and government agencies are also exempt from FLSA regulations.

“While businesses may believe they have met all the necessary guidelines regarding unpaid programs, they may find that more often than not, they haven’t,” said Tyson. “When in doubt, it’s always a good idea to check with the Department of Labor or your human resources or general counsel departments.”

In addition to complying with FLSA, businesses should consider the following when establishing an internship program:

• Paid or unpaid? Recent lawsuits by unpaid interns are changing the landscape for organizations with internship programs. While these cases dealt with compensation issues, to help mitigate the potential for litigation, companies also should consider how to treat interns with regard to anti-discrimination and anti-retaliation policies, handling grievances, and any other protections that are offered to other employees.
• Work hours? Beware of state wage and hour laws which may vary in terms of what is considered proper compensation or hours worked.
• Program information? Interns should receive a detailed description of the internship, the training experience and a statement that the program complies with labor laws.