What You Need to Know About A Legally Compliant Internship Program

Internship programs are extremely valuable to employers – they are an excellent framework for sourcing potential new hires and grooming innovative talent. However, as beneficial as they can be, it’s important that if you use unpaid or paid interns that you create an internship program that is legally compliant in order to avoid costly penalties and litigation down the road.

The Department of Labor moved from their “six-factor test” to a “primary beneficiary test” for employers to follow in 2018. The “primary beneficiary test” allows for more flexibility within company programs and increased opportunities for unpaid interns to gain valuable hands-on experience.

In order to comply with the DOL’s “primary beneficiary test,” unpaid internships must follow the seven guidelines as listed below:

1. Both the intern and the employer must explicitly understand that there is no compensation for the internship.
2. The program must provide hands-on training similar to an educational environment.
3. The internship must be connected to the intern’s formal education either with coursework provided by the employer or program, or the intern’s receipt of academic credit.
4. The internship must accommodate the intern’s academic schedule and commitments, which can be outlined in an academic calendar.
5. The scope of the internship must be limited in time and duration, and during that period the intern must be provided with educational benefits and/or hands-on experience.
6. The intern’s work should complement the work of paid employees, as a means of providing valuable educational benefits.
7. The intern and the employer both understand that the internship does not come with a promise of a paid job at the end of the program.

As an employer, it’s important that if you run an internship program (especially unpaid) that it benefits the intern. The goal of any internship program is to create an environment where the intern can practice their skill. An employer should never implement such a program as a means for unpaid labor.

Of course, it’s important to always check with your state laws before creating an internship program for your business. Many states differ in their own wage and hour laws. As a precaution, the employer should create a one to two-page acknowledgement that describes the type of work that will be done during the internship and outlines the educational components of the program. The expectations of pay or no pay should also be put into the acknowledgement to ensure the intern’s expectations are managed.
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If the employer is still unsure whether their internship program complies with the DOL and state laws, it’s best to offer interns applicable minimum wage to avoid pricey penalties or litigation in the future.

In cases where employers have failed to follow the requirements necessary for an unpaid internship program, these companies ended up paying much more in attorney fees and lost time in comparison to the costs of paying the intern a minimum wage for the duration of the program.

DISCLAIMER: The information contained in this article is intended for informational purposes in order to give the reader a general understanding of this important topic. This article is not intended to be legal or tax advice, so if you need additional information, please consult a knowledgeable attorney.