Free Interns Can Cost Your Company

The following is a sample article written by ContentWriters for a client in the business industry. 

As temperatures rise, so does the hiring of interns. Historically, student interns have been considered a gold mine of free labor. Students exchange their time for resume boosting experience and references. However, as the saying goes “nothing gold can stay.” Business owners who hire unpaid interns could be violating the federal Fair Labor Standards Act (FLSA) and opening themselves up to lawsuits.

Some basics that all business owners should know:

The FLSA

The FLSA requires that, among other things, employers pay employees a minimum hourly wage. That federal minimum wage is currently set at  $7.25 for most states.

It also requires overtime pay when employees work over 40 hours in a work week.  As with any law, there are a multitude of exceptions and details.

Applicability to Internships

While not expressly carved out in the act, courts and the Department of Labor have found “trainees” exempt from the minimum wage and overtime requirements of the act. The logic? That the FLSA requirements apply to the hiring of employees and trainees are not employees. For years, employers have been hiring students and assuming that by calling them interns, they would fall under this trainees exemption. But…

The Game Changer

Two unpaid student interns, Eric Glatt and Alexander Footman, who worked on the movie Black Swan, challenged this when they brought suit against Fox Searchlight Pictures (Glatt et. Al. v. Fox Searchlight Pictures, Inc.).

They alleged that they received no training or educational benefit but served instead as free substitutes for regular employees and thus, were entitled to compensation under the FLSA. Some of their duties included making coffee, taking out trash, and cleaning the office. The 2nd Circuit court agreed with them. The full opinion can be found here. Aspects of the case are being appealed, but the landscape for hiring interns has already changed. 

The Guidelines

With that background, the question most business owners have is: Do I have to pay my interns? 

The answer: it depends, but probably.

The Department of Labor provides guidance and a six part balancing test in this Fact Sheet. If you hire or are considering interns, reading the entire sheet is highly recommended. It’s only two pages!  

The take-away is that hiring a student and calling “intern” does not automatically mean that they are. Courts will look at the substance of the internship position to determine whether the student is a “trainee,” that need not be paid, or an “employee,” entitled to a wage. As a practical matter, a part-time intern for 20 hours per week, will only cost you $145 at the current minimum wage.

The Fair Labor Standards Act is just one of the many employment laws business owners must comply with. An attorney can advise you and help you develop business practices that protect your interests.

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