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Summer Interns: Understanding the Legal Implications

Many nonprofits rely on the services of unpaid interns, and interns can use their time at a nonprofit to gain valuable professional experience and to develop industry contacts.  However, the use of unpaid interns is not appropriate in all situations.  The U.S. Department of Labor (“DOL”) has recently stepped up its enforcement of wage and hour laws with respect to unpaid internships, and several interns have sued the companies at which they interned for back pay and overtime.  With summer internships approaching soon, your organization should ensure that your unpaid interns are properly categorized and that you are complying with wage and hour laws.

Understanding the Difference Between Employees and Unpaid Interns

DOL has issued a six-part test to help determine whether an intern is exempt from minimum wage and overtime laws or whether the individual is an employee who must be compensated.  According to the DOL, if all of the following criteria are met, the intern is not an employee and is not subject to wage and hours laws:

  1. The internship, even though it includes actual operation of the facilities of the employer, is similar to training given in an educational environment;
  2. The internship experience is for the benefit of the intern;
  3. The intern does not displace regular employees, but works under close supervision of the nonprofit’s staff;
  4. The employer derives no immediate advantage from the activities of the intern, and on occasion its operations may actually be impeded;
  5. The intern is not necessarily entitled to a job at the conclusion of the internship; and
  6. The employer and the intern understand that the intern is not entitled to wages for the time spent at the internship.  

Individuals who did not meet all six criteria have sued under the federal wage and hour laws for back pay and overtime.  Courts in Maryland and Virginia have not followed the DOL test specifically, and instead have focused on whether the internship is primarily for the benefit of the intern or the employer.  Other courts have generally followed the DOL’s test.  The courts in DC have not expressed an opinion about what test to follow.  However, no matter what test is used, there are common elements that you should follow when developing an internship program.  

First, the internship program should be educational and part of an academic experience, such as when the intern receives academic recognition from his educational institution for completing the internship.  To the extent possible, an employer should work with the intern and the intern’s educational institution to provide academic credit for the internship.  

In addition, the employer should not use the intern as a substitute for regular workers or as a supplement to its current workforce.  The assignment may not be considered an internship if the employer would have hired additional employees or asked its existing staff to work additional hours, if not for the intern.  Any work the intern does should complement your employees’ work—such as conducting non-critical research—and not supplant it.

The intern should also be engaged in work designed to benefit the intern, such as shadowing an experienced worker to observe and learn industry-relevant skills, or rotating through multiple departments to learn how the organization operates.  Interns should not be engaged in the employer’s routine operations such a filing, word processing, or other clerical tasks, and should be closely and constantly supervised as part of their training experience.  As one lawyer succinctly put it—don’t ask the intern to get you coffee.    

Finally, the intern should acknowledge, preferably in writing, that he or she will not receive any compensation in exchange for being an intern, and should not be promised a job at the conclusion of the internship.

Employer Practices

To ensure that your interns will not be considered employees, there are a few steps your organization should take.  First, your organization should post clear position descriptions with each internship posting or announcement that include the title of the position, the key responsibilities, that the position is unpaid, the location, the time commitment, and any qualifications required.  You should also carefully select interns and follow your normal screening practices.

Even with unpaid interns, you should create offer letters delineating the requirements of the internship. At a minimum, the writing should include the following:

  1. The understanding that there will be no compensation;
  2. The time commitment of the internship;
  3. That the internship is at-will;
  4. Any contemplated school credit or a description of the educational intent of the program; and
  5. Language that the internship is not a trial period for prospective employment.

Further, your organization should have a volunteer handbook and have policies in place regarding payments, gifts, and reimbursements of expenses to interns and other volunteers.  You should also closely monitor interns throughout the internship to ensure that the interns are receiving educational benefits from their experience.  Finally, keep in mind that even interns can be dismissed, including for insubordination or poor performance.

Nonprofit Interns versus Volunteers

Nonprofit organizations differ from for-profit entities because nonprofits often have volunteers who perform valuable and substantive work.  The DOL has indicated that unpaid internships sponsored by local governments and charitable organizations are generally permissible if the interns volunteer their time “freely and without anticipation of compensation.”  However, the DOL has not published any specific guidance with respect to nonprofit internships; furthermore, courts tend to treat individuals as employees, rather than volunteers, if the organization manages their daily work, requires them to adhere to set schedules, or disciplines them for not following the organization's rules.  It is therefore advisable for nonprofit organizations to follow the same general rules as for-profit organizations with respect to internship programs, since the distinction between a nonprofit “volunteer” intern and an employee can involve the same functional analysis as in the for-profit context.