Interns and Your Business - The Legal Issues to Consider

Are you thinking of hiring an intern? If so there are a variety of legal issues to consider. Keeping current on compliance matters will ensure the company and interns get the most from the experience.

By Kim Freeman - Director of HR Services, JD

Although it wasn’t that long ago when snow was flying in some parts of the country, summer internship season is fast approaching! Whether your business is an old pro at the internship game, or you are thinking of hiring your first one, there are a variety of legal issues to consider. Keeping current on compliance matters will ensure the company and interns get the most value from the experience.

“There is no legal status associated with the word ‘intern’,” according to Tara Burke, of Counsel with the national workplace law firm of Jackson Lewis. Calling individuals “interns” does not mean that they are not your employees. This is true even if your company has an agreement with an institution of higher education to supply interns and/or the internship program is of limited duration--summer, a semester, holiday break. Interns are most likely employees and all the requisite employment laws apply.

Interns and the FLSA

As employees of your business, interns must be compensated in accordance with the Fair Labor Standards Act (FLSA). They should follow the same rules and policies as your “regular” employees about overtime and rest and meal breaks. Employers should consider whether interns should sign off on receiving an employee handbook or select employee policies, Burke added.

Just as important, Burke noted, is to have interns sign non-disclosure and confidentiality agreements if the intern will have access to confidential information. “It is also a good idea to have interns sign an acknowledgement memorializing what their role is, re-emphasizing the employment-at-will doctrine, and noting there is no promise of future employment,” Burke said.

Want to learn more about FLSA and how you can make your summer internship program compliant? Contact Resourcing Edge.

Interns and Anti-discrimination/harassment

While all employees should be free of discrimination and harassment, be sensitive to the even greater power disparity with interns, Burke advised. “It is important that everyone understands there is no ‘free pass’ because they are interns and on premises for a limited time,” she said. Summer interns may attend social events outside working hours, so management and co-workers need to keep Title VII in mind. “The intern relationship can sometimes present that classic fact pattern that results in claims.”

Interns and Benefits

Interns are employees, albeit temporary, and as a result they may be eligible for company benefits, according to Natalie Nathanson, a benefits attorney with Jackson Lewis. A company may be able to avoid offering health insurance if its interns are “seasonal” workers as defined by the Affordable Care Act (ACA), i.e. they work less than six (6) months and typically at the same time every year, Nathanson said. “If interns don’t meet the ACA’s definition of a seasonal employee, and if they are otherwise eligible under the terms of your health plan, they would be eligible for health benefits,” she added.

As for retirement plans, interns would become eligible to participate in a company sponsored plan if they qualify under the terms of the plan. The IRS does not allow employers to exclude employees who work more than 1,000 hours and meet the plan’s other eligibility criteria such as a waiting period, Nathanson said.

Contact your Resourcing Edge sales consultant to help you navigate the Affordable Care Act as it relates to hiring summer interns.

Paid Internship Program Pointers:


A Word About Implementing Unpaid Internships: Don’t

While many companies are focused on efficiency and doing more with less staffing; it is challenging for any business to meet the criteria established by the Department of Labor (DOL) for “unpaid internship” programs. “Some non-profits may already have established volunteer programs that can fit in the guidelines, but it is very difficult for other businesses,” Burke said.

In January, the DOL announced it has adopted a “primary beneficiary” test that replaces the former rigid six-factor test in effect since 2010. Now, there is a seven non-exhaustive factor test to determine if a company can offer an unpaid internship: 1) expectation of no compensation is clear; 2) like what might occur in an education setting, such as clinicals or other hands-on training; 3) tied to the intern’s formal education program; 4) accommodation to the intern’s academic commitments; 5) the duration provides the intern with beneficial learning; 6) not displace other employees, but complements the work product of others while providing education benefits; and 7) no promise of a paid job at the end. No one single factor is determinative and other factors can be considered.

While a bit more flexible, it is unlikely many internships can meet the criteria allowing participants to work without pay. Accordingly, most interns are employees for purposes of the FLSA. Companies would be wise to avoid a DOL audit by sticking to a paid internship program unless they have vetted an unpaid one with an experienced employment lawyer. 

More questions regarding internships?  Contact your Resourcing Edge sales consultant by calling (877) 703-8010.

Ms. Freeman is Director of HR Services at Resourcing Edge and a licensed attorney with more than 20 years of employment law experience.

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