Ways to Help Business Internship Partners Avoid DOL Pitfalls

by Ogletree, Deakins, Nash, Smoak & Stewart, P.C.

Many colleges and universities require some kind of practical, hands-on experience as a part of their curriculum. Employers and schools alike place a premium on real world experience that cannot always be gained from sitting in a classroom. As such, over the past several years unpaid internships have become overwhelmingly popular among schools and businesses.

Colleges and universities benefit from such internship programs by offering their students a chance to gain valuable experience and network within their chosen field. But educators beware. Recent regulations by the U.S. Department of Labor (DOL) could threaten future unpaid internship opportunities.

In April 2010, the DOL’s Wage and Hour Division issued Fact Sheet #71, clarifying when interns must receive compensation under the Fair Labor Standards Act (FLSA). Ultimately, the more academically focused an internship program is, the less likely the DOL will be to deem the student an “employee” under the FLSA. Here are some tips institutions can use when structuring an unpaid internship with for-profit companies.

  1. The more educational the better.

The internship should be structured primarily as a teaching and training tool that provides hands-on experience to the student. Involvement with an academic institution is the best way for businesses to comply with the FLSA. And the more involvement the better. The more structure schools place on academic internships on the front end, the better businesses can tailor the internship to fit the DOL’s requirements.

  1. The intern should reap the benefits.

Structure the internship to ensure that the intern largely benefits from the experience. Although the company may derive some benefit from the intern’s presence, the intern-company dynamic should not necessarily be mutually beneficial.

  1. Close supervision is key.

Internship programs that involve shadowing, where the intern works closely with a current employee who can teach and supervise, could reduce the chances the student receives “employee” status. Schools should also consider whether the business is using the internship as an opportunity to gain an extra pair of hands during a busy season or to subsidize its staff. If so, it is less likely that the student will receive the academic training necessary to continue working unpaid.

  1. Each task should have an educational benefit.

Is it likely that the interns will answer a phone call every once in a while? Sure. Will they make copies a couple times? Probably. But menial tasks such as these should be few and far between. If they occur on a regular basis, there must be an educational benefit associated with that task. (And no, learning the value of hard work probably isn’t an educational benefit). Try to structure internship requirements that ensure students aren’t shipped off to a file room for three months.

  1. The internship should have definite beginning and end dates.

When developing an internship program, set definite beginning and end dates. Internships for indefinite time periods are more likely to require compensation. Also, internships should not provide companies with “trial runs” for future full-time employees. If the intern has an expectation of being hired at the end of the internship, then the intern is entitled to pay.

  1. Everyone should understand that the internship is unpaid.

If your school has an internship agreement, consider acknowledging that the internship is unpaid. The agreement could also emphasize the educational benefits associated with that particular internship. If you have a hard time thinking of any benefits, then you may want to reconsider offering the internship to students.

Although companies with internship programs are the ones that must ultimately decide whether interns can be paid, colleges and universities still play a vital role. The development of internship programs focused on education starts with the schools. By ensuring that your students get the most out of an internship, you help those companies teaching your students to comply with DOL guidelines.

Shannon C. O’Guin is an associate in the Birmingham office of Ogletree Deakins.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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