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Grow Your Business Your Team

Creating a Successful (and Legal) Internship Program

Creating a Successful (and Legal) Internship Program
Credit: SK Design/Shutterstock

College juniors and seniors are told that internships during school will help boost their chances of landing a job post-graduation. These students usually expect to work in exchange for "experience" or academic credit, and companies are often more than willing to oblige.

But if you think "intern" equals "free labor," think again: Major corporations have gotten into deep legal trouble by taking this approach, including Mary-Kate and Ashley Olsen's Dualstar Entertainment Group. Last month, Fox News reported that a group of former interns, who worked for 50-plus hours a week with no pay, filed a class-action lawsuit against the company for wage theft.

While the internship horror stories that spur this type of legal action don't happen in every company, they do provide a valuable lesson in what to do — or rather, what not to do — when you're creating an internship program for your organization. Business News Daily spoke with legal and HR experts about providing a beneficial, legally compliant experience for your interns in a for-profit setting. [The 20 Best Companies for Internships]

The matter of pay is often the crux of internship-related lawsuits. Companies that don't pay their interns, yet expect them to perform the duties of a regular paid employee, are the ones who land themselves in hot water. In some states, like California, it's actually illegal to offer unpaid internships, but in many states, it's still OK not to provide monetary compensation.

So how do you know if you need to pay your interns? Adam Kemper, a labor and employment attorney for Greenspoon Marder law firm, said you need to look at both what the intern's duties are and whether he or she is receiving an educational benefit from the experience. First, there needs to be a distinction between interns' duties and a typical employee's duties if you don't intend to pay them.

"On a day-to-day basis, what is the intern doing?" Kemper said. "Shadowing? Running errands? Is he or she [working] independently or supervised?"

"Ensure that [an unpaid] intern is not performing work or taking on responsibilities that would typically be performed by a full-time employee," added Samantha Lambert, director of human resources at Web design company Blue Fountain Media.

Second, determine whether the intern is able to receive academic credit for the internship. If this is not a possibility or the intern is already out of school, then Lambert noted that your company must comply with the Fair Labor Standards Act (FLSA). This means your internship program must be designed so your company does not benefit at all from the interns' work, and the experience should be for educational purposes only.

If there's any doubt whatsoever about whether the worker should be classified as an intern or employee, Kemper advised sticking with "employee" and adding him or her to the payroll.

"What's been problematic for companies is that they're having interns run errands, get coffee, buy things for [employees] — nothing educational," Kemper told Business News Daily. "If you want to have someone do that, treat them as an employee and pay minimum wage."

Even in states that don't require interns to be paid, Sarah Nahm, CEO of applicant tracking system Lever, said it's good practice for employers to pay their interns anyway.

"Paying means employees and managers will take the intern program more seriously and invest their time and energy in the intern's projects and the intern themselves," Nahm said.

The way you structure your internship program is largely dependent on whether or not you plan to pay them. Paid interns who receive at least minimum wage and overtime pay for working beyond 40 hours per week can technically perform the work of your regular workforce. However, the Department of Labor has a very specific set of guidelines regarding what unpaid interns can and can't do:

  • The internship experience must primarily be for the benefit of the intern, and offer a structure that is "similar to an educational experience." The employer should aim to provide the intern with skills that can be used in his or her future career, rather than skills particular to its own operations.
  • Unpaid interns should not perform the routine work of the business on a regular and recurring basis, and the business shouldn't be dependent on the work of the intern.
  • Employers can't use interns as substitutes for regular workers or to augment its existing workforce during specific time periods unless they are paid at least minimum wage.
  • Unpaid interns should work under the close and constant supervision of regular employees. Offering the same level of supervision to interns that is offered to regular employees suggests an employment relationship, rather than training, and those interns should be considered employees.

Kemper advised thinking about the tasks you'd want an intern to do long before you begin searching for potential candidates, so you can clearly articulate the duties and learning experience an intern can expect from your company.

When employers are using college students as interns, internships are typically conducted on a semester-by-semester basis, but this isn't always the case. There are no real rules about the minimum or maximum time frame of an internship, but the Department of Labor states that internships "should be of a fixed duration, established prior to the outset of the internship." This means that you can't have someone working for you indefinitely as an intern, and you'll need to work out a firm start and end date before each intern begins working with your company.

If an intern performs very well and you want to offer him or her a full-time position at the end of the internship period, you may do so, but it is illegal to promise employment from the outset. Any opportunity for the intern to become a regular staff member should only be discussed at the conclusion of the internship, Lambert said.

If you want your interns to get the most out of their short time with your company, here are a few key steps to follow.

Spell out the policies and procedures for the internship and have the intern sign off on them. Don't allow your interns to begin working for you until they review and sign a document clearly stating everything they need to know about the internship, Kemper said. This is as much for your benefit as it is for theirs, as it will help protect you from liability if there's any question about an unpaid intern's work. At minimum, this document should explicitly state whether the internship is paid or not; how long the internship is; that there is no guarantee of employment after the internship; and, if unpaid, that the intern in not entitled to wages.

Structure the timeline of the internship. Because internships should have an educational component, Lambert recommended treating your program similar to academic coursework, and providing a timeline disclosing what the intern will learn, and things like when, with whom, how and why.

"This preparedness can help ensure that everything runs smoothly and on track as the program progresses," Lambert said. "Set up frequent check-in points and testlike evaluations to identify what's being learned and retained, and what areas need to be revisited and focused on. This can help shape where the intern may need more guidance, and where they may need less guidance."

Nahm agreed, and noted that the semester or internship period should be structured around projects, rather than random day-to-day tasks. Ideally, you should have the intern give a final presentation to the team at the end, she said.

Help interns understand their role and make them feel like part of the company. Just because interns are not technically employees doesn't mean they shouldn't understand the bigger picture of the business. Nahm said employers should dedicate some time to sharing the company's mission, introducing interns to various departments and educating them on the company's goals.

At the end of the internship, you should allow the interns the opportunity to evaluate you and share what they learned.

"Hold your team and company accountable to providing a good experience and close the feedback loop," Nahm said. "[Have] an open-ended conversation to hear from the interns about what they enjoyed and suggestions for improvements."

Make sure you've dotted the I's and crossed the T's. Before you implement any kind of internship program at your company, it's a good idea to have an employment attorney review your policies to make sure they're FLSA-compliant, Kemper said. For more information about legal requirements for internships, visit the Department of Labor website.

Nicole Fallon Taylor
Nicole Fallon Taylor

Nicole received her Bachelor's degree in Media, Culture and Communication from New York University. She began freelancing for Business News Daily in 2010 and joined the team as a staff writer three years later. She currently serves as the assistant editor. Reach her by email, or follow her on Twitter.