Can My Company Offer Unpaid Summer Internships? Yes, but be careful you don't violate the wage and hour laws.

Posted on July 2, 2010 by Steven I. Adler

High school and college students often are willing to work for little or no pay during the summer months to bolster their resumes. Businesses see this as a good opportunity to get some extra help around the office. However, private sector, "for-profit" employers need to be aware that they are required to pay at least minimum wage and overtime to summer help unless these internships or training programs meet the following criteria:

  1. The internship is similar to training which would be given in an educational environment;
  2. The internship is for the benefit of the trainees;
  3. The interns do not displace regular employees, and work under close supervision of existing staff;
  4. The employer derives no immediate advantage from the activities and, on occasion, its operations may actually be impeded;
  5. The interns are not guaranteed permanent positions at the conclusion of the internship; and
  6. The employer and interns understand beforehand that the internship is unpaid.

See U.S. Dept. of Labor, Wage and Hour Division, Fact Sheet #71.

The determination whether an internship or training program meets all six requirements depends upon all the facts and circumstances of each program. In addition to owing unpaid wages and potentially hefty fines, unpaid programs that do not meet all of the Department of Labor's criteria could lead to legal problems involving workers' compensation, employee benefits, unemployment insurance and federal and state taxes.

Employers should structure unpaid internships to meet the above criteria. Also consider having a written agreement with the interns outlining the nature of the work and that the program is being operated to provide a learning experience for the interns. If in doubt about compliance, employers should pay at least minimum wage and overtime to avoid legal problems because the Fair Labor Standards Act, the federal statute that covers minimum wages and overtime, as well as state wage and hour laws, define “employ” very broadly.

 

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U.S. Department of Labor Releases Frequently Asked Questions for Furloughs and Other Reductions in Pay and Hours

Posted on August 17, 2009 by Michael N. Morea

In July, the United States Department of Labor released an updated "Frequently Asked Questions Regarding Furloughs and Other Reductions in Pay and Hours Worked Issues."  The FAQ can be found at http://www.dol.gov/esa/WHD/flsa/FurloughFAQ.pdf and answers basic questions regarding how the Fair Labor Standards Act ("FLSA") impacts reductions in pay or in hours worked by employees.

Given the current economic environment many employers are reducing their workforce.  Other employers, instead of terminating employees, are reducing the compensation their employees' receive or reducing the hours worked in order to reduce payroll.  Any employer seeking to reduce pay or hours should be familiar with how the FLSA might impact such a decision.  Many of the questions an employer may have are covered by the FAQ, which answers questions such as whether it is legal to reduce salary or hours of employees under the FLSA.  The FAQ includes discussions of situations involving both exempt and non-exempt employees under the FLSA and can help employers avoid violating the FLSA. 

Although the FAQ covers the FLSA, employers should be aware that reductions in hours or pay may also involve consideration of other employment laws, such as anti-discrimination or leave laws, which are not covered by the FAQ.
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