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The Employer Guide to Understanding Internship Laws

A robust internship program offers benefits to both employers and interns. Employers enjoy a preview of potential future employees, and interns gain valuable work experience to round out their resumes. However, the success of an organization's program requires careful adherence to specific internship laws around pay, benefits and working conditions.

An Overview of Internships

At its core, an internship is intended to be an educational opportunity, and many businesses partner with local colleges and universities to source college students and recent grads for these learning experiences. Interns typically sign on for a specific period of time - for example, three to six months - that coincides with their school calendar. Some students participate in internships to fulfill graduation requirements, and the hands-on experience is eligible for course credit. Others choose internships to supplement their education outside of school, for example, during summer breaks. Internships can be full-time or part-time, depending on the needs of the business and the student's schedule, and there are paid and unpaid internship opportunities, depending on how the positions are structured.

Internship Laws to Review

Paid vs. Unpaid Internships

Internships aren't intended to be a source of free labor for businesses, and in the past decade, the Department of Labor (DOL) has tightened the parameters around which internships are exempt from minimum wage requirements. Unpaid internship programs must meet six federal legal criteria. All others must be paid, and the participants are considered employees under the Fair Labor Standards Act (FLSA).

The six criteria required for unpaid internships are as follows:

  • Training resembles that which would occur in an academic setting or a vocational school, though the internship takes place in a working business facility.
  • The training is for the benefit of the interns, not the employer.
  • Internships do not displace regular employees. Instead, interns work in partnership with and under the supervision of regular employees.
  • Employers receive no immediate benefit from interns’ activities. In a true internship, program training will occasionally impede business operations.
  • Interns are not promised or entitled to a regular position once they have completed the internship.
  • Employers and interns have a mutual understanding that the internship does not qualify for pay before the internship begins.

Any internship programs that fall outside of these six parameters must be paid, and participants are considered employees for the duration of their internship. Organizations that do not adhere to these laws will be subject to fines and penalties.

Liability for On-The-Job Injuries

When internships are the result of partnerships between employers and universities, there can be some question about which organization is responsible if students are injured while working in their capacity as interns. While workers’ compensation laws do vary between states, one point is consistent: workers' compensation is intended to protect employees. Therefore, the distinction between interns and employees under the FLSA is critical. If interns do not meet the six criteria above, they are paid employees and covered by workers' compensation for on-the-job injuries. If the internship is a true educational experience, on-the-job injuries are the responsibility of the school or university sponsoring the program.

Changing Sick Pay Regulations

Earned and paid sick time are hot topics in labor law, and changes are coming quickly. Because there is no federal regulation aside from an executive order requiring paid sick leave for federal contractors, cities and states are designing their own regulations to meet the needs of constituents. As of April 2017, seven states and the District of Columbia have enacted paid sick time laws, along with a number of cities and municipalities. Unfortunately, the result is inconsistency, and requirements for providing earned and paid sick time can vary widely depending on the work location. Determining which laws apply to interns can be a complex endeavor. Generally speaking, earned and paid sick time laws do not apply to interns, but they do apply to employees. This point relates back to the six requirements that distinguish an intern from an employee.

Other Benefits Considerations

While interns are not eligible for most company benefits, those that qualify as employees under the FLSA are typically permitted to participate according to the organization's standard eligibility requirements. An exception exists under current federal health insurance regulations. As of May 2017, organizations with 50 or more employees are required to offer health benefits to any individual working 30 or more hours per week. While the law does not specifically reference interns, it is currently understood that interns working 30 or more hours per week must be offered coverage.

Though primarily designed as educational experiences, internship programs are a valuable resource for employers. Internship programs contribute to a company culture focused on learning and development, and they are an effective way to influence employer brand while attracting talent. That being said, ensuring that programs meet the requirements of applicable labor laws is an important element of the program's overall success.

Sources:

Brockhausen, C. & Kalten, B. (2016, September). More California cities, Chicago, Minneapolis and St. Paul enact paid sick leave laws. Retrieved from https://www.towerswatson.com/en-US/Insights/Newsletters/Americas/insider/2016/09/more-cities-enact-paid-sick-leave-laws

Gulati, A. (2015, June 4). Are Your Summer Interns ACA-Eligible? Retrieved from https://www.shrm.org/resourcesandtools/hr-topics/talent-acquisition/pages/summer-interns-aca-eligible.aspx

Minton, Peter I. (2013, April 19). 6 Legal Requirements For Unpaid Internship Programs. Retrieved from https://www.forbes.com/sites/theyec/2013/04/19/6-legal-requirements-for-unpaid-internship-programs/#34ad93546bf1

National Conference of State Legislatures. (2017, February 8). Paid Sick Leave. Retrieved from http://www.ncsl.org/research/labor-and-employment/paid-sick-leave.aspx

United States Department of Labor. (2016, September 30). Wage and Hour Division: Final Rule: Executive Order 13706, Establishing Paid Sick Leave for Federal Contractors. Retrieved