Employee Relations, Hiring Strategy, HR Updates

The Myth of Summer Interns

We’re all familiar with urban legends — Bigfoot, Chupacabra, the men in black, and the unpaid summer intern.

We at HRA have this discussion with at least one client at the end of each school year. It’s
understandable – summer internships are not what they used to be, and quite honestly, haven’t been for some time. However, the changes are due to DOL rulings, and since not everyone is as up to date on those as us HR nerds, it’s easy to keep the old stories of unpaid summer help alive.

After all, the “kid’s getting experience,” right?

Maybe and maybe not. It all depends upon whether or not the work they are doing is considered the work of an employee. More on that in a bit.

Internships, for many companies, have basically become the new “entry level” job. They are essentially training positions with a designation separate from “regular employment.” The premise goes back to the Middle Ages when young people would apprentice to learn a craft and earn access to a tradesman’s guild (bear in mind, though, that in those days most apprenticeships while unpaid included food, boarding, clothing, and all tools needed). Internships have also been long associated with medical training.

The change from trade and medicine came about not long after the Fair Labor Standards Act of 1938 established the right to minimum wage and overtime. The act determined that railways didn’t have to pay brakemen for their weeklong training program – this loophole was then cited again and again by organizations to say that their training programs could be unpaid. In 2010, six requirements were established that must be met in order for a job to qualify as an unpaid internship:

(OLD RULES)
1. The internship must be similar to training that would be given in an educational
environment;
2. The internship must be for the benefit of the intern;
3. The intern does not displace regular employees;
4. The employer derives no immediate advantage from the intern;
5. The intern is not entitled to a job at the end of the internship; and
6. The intern understands that he or she is not entitled to wages.

However, as more people entered the college world, internships became more prevalent.
Interns also became wiser and started questioning all the work they were doing for no pay,
especially upon seeing colleagues getting paid for the same responsibilities.

The DOL released updated guidelines in 2018
(https://www.dol.gov/sites/dolgov/files/WHD/legacy/files/whdfs71.pdf) featuring seven factors to determining unpaid internships. Unlike the first set of rules, these are looser, and not all have to be met. It’s more based upon circumstances, but that doesn’t necessarily help employers in determining whether or not their intern can be unpaid (base pay maybe shouldn’t be in the eye of the beholder, or the one writing the check):

(CURRENT RULES)
1. The extent to which the intern and the employer clearly understand that there is no
expectation of compensation. Any promise of compensation, express or implied,
suggests that the intern is an employee—and vice versa.
2. The extent to which the internship provides training that would be similar to that which
would be given in an educational environment, including the clinical and other hands-
on training provided by educational institutions.
3. The extent to which the internship is tied to the intern’s formal education program by
integrated coursework or the receipt of academic credit.
4. The extent to which the internship accommodates the intern’s academic commitments
by corresponding to the academic calendar.
5. The extent to which the internship’s duration is limited to the period in which the
internship provides the intern with beneficial learning.
6. The extent to which the intern’s work complements, rather than displaces, the work of
paid employees while providing significant educational benefits to the intern.
7. The extent to which the intern and the employer understand that the internship is
conducted without entitlement to a paid job at the conclusion of the internship.

If you aren’t sure if your intern meets enough of these criteria to be unpaid or not, the best bet is to pay them. Misclassification can be costly – not only in back pay, fines, and potential litigation, but also in employee morale and intern retention.

If you need help in determining the best way to pay your interns, as well as how to set up your entire internship program, give us a call. HR Affiliates loves to help new graduates get into the workforce!