“We recommend that employers get something in writing, preferably with the school that spends everyone`s expectations,” Orr said. “You want to consider having something in writing that says there will be no waiting for compensation, that the internship is limited to a beneficial learning period and that there is ultimately no promise of employment. If they know these three things in writing and get through them, you`ll be in good shape. Summer is fast approaching, so it`s time for summer internships that university students rely on to gain valuable work experience. Employers might want to offer these internships without compensation, but is it legal? There are things to remember here. The U.S. Department of Labor (DOL) has a six-factor test that requires the following criteria to be met for an unpaid internship: litigation can be costly to employers, even if a court ultimately decides that the unpaid internship program is valid. Until an employer obtains a court order that the program was valid, the company will generally have paid more legal fees and wasted time on the human resources department than it would have been simply paying the minimum wage, Aragon said. According to Kristy Offitt, a lawyer with Ogletree Deakins in Atlanta, employers would be well advised to focus recruitment efforts for unpaid internship programs on those who receive demonstrable training or educational benefit from the internship. The DOL on January 5 launched a rigid six-part test that had to be completed before the trainees could go without pay. In their place, the department established a “primary favor test” to determine whether the trainees are employees.
The new test contains seven factors to consider, but each factor does not need to be completed and no single factor is determinative. The criteria are intended to examine the “economic reality” of the intern-employer ratio to determine who is the main beneficiary of the internship. If the intern is the main beneficiary of the relationship, he or she does not have to be paid. Under the Fair Labor Standards Act (FLSA), companies must pay at least the minimum wage to their employees, unless their work obligations are covered by an exception to the rule. This means that companies can legally hire unpaid interns only if the internship meets certain criteria. Offitt suggested that employers consider the following steps when deciding to make their internship program unpaid: legal experts tend to advise employers, pay trainees as the only sure way to avoid wage and hourly disputes, but they recognize that the unique circumstances of the internship may lead to a different decision. Working with an educational institution can be especially helpful, as the school will likely have a list of criteria for internship content and skills that interns should master during the program, said Rebecca Aragon, a lawyer at Littler in Los Angeles. Schools will want to preserve the integrity of the program and measure its results. Earlier this year, DOL replaced its rigid six-factor test with a seven-factor “primary receiver test” to determine whether the trainees are employees. The new test is considered more flexible because it is not necessary to meet the seven criteria necessary for an internship to be not paid. On the contrary, the DOL will take into account “all the circumstances.” If employers still wish to attend an unpaid internship program, they should ensure that it has a strong educational component. When the recruitment phase is complete and an employer has made a decision about the candidate it wants to recruit for a particular position, the employer usually makes an oral offer and concludes a letter of offer of employment.