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Question: We are offering non-paid positions (volunteer work) to interns (PhD students) working at the office on research projects, collecting data and conducting study projects. What liabilities do we need to be aware of as these volunteer interns will be working on company premises?

Answer: First of all, the biggest issue you face is the issue of the unpaid internships.  The Fair Labor Standards Act (FLSA), which sets standards for the basic minimum wage and overtime pay, affects most private and public employment. Covered and non-exempt individuals who are “suffered or permitted” to work must be compensated under the law for the services they perform for an employer. Internships in the “for-profit” private sector will most often be viewed as employment, unless the test described below relating to trainees is met. Interns in the “for-profit” private sector who qualify as employees rather than trainees typically must be paid at least the minimum wage as well as overtime compensation for over 40 hours worked in a workweek.

The Test for Unpaid Interns:  The determination of whether an internship or training program meets this exclusion depends upon all of the facts and circumstances, and the following six criteria must be applied when making this determination:

  • The internship, even though it includes actual operation of the facilities of the employer, is similar to training which would be given in an educational environment;
  • The internship experience is for the benefit of the intern;
  • The intern does not displace regular employees, but works under close supervision of existing staff (this is the test that says that the intern isn’t answering phones, delivering mail, filling in for an absent employee, etc – that the intern is doing work that is for his/her benefit and not necessarily for the employer);
  • The employer that provides the training derives no immediate advantage from the activities of the intern, and on occasion its operations may actually be impeded;
  • The intern is not necessarily entitled to a job at the conclusion of the internship; and
  • The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

If all of the factors listed above are met, an employment relationship likely does not exist under the FLSA, and the Act’s minimum wage and overtime provisions do not apply to the intern. This exclusion from the definition of employment is necessarily quite narrow because the FLSA’s definition of “employ” is very broad.

Here  is our practical advice before you hire an intern:

  1. Develop an ‘intern policy’ and define the job carefully so that both parties are clear about job duties and expectations.  This reduces misunderstandings that can lead to lawsuits. The policy should define the basic internship program, such as compensation structure (or the fact that interns won’t be paid), eligibility requirements and the intern’s at-will status. Make sure the policy doesn’t establish what could be viewed as a legally binding contract. Never infer the promise of employment for a specified period.
  2. Define supervisory roles and supervisor/intern evaluations. Reliable supervision is the key to preventing problems, including injuries, discriminatory actions and performance failings. Make sure all supervisors know who is overseeing the work of each intern.
  3. If possible, obtain formal documentation from the intern’s college explaining the educational relevance of the internship if they will earn credits.
  4. Ask whether the school provides liability insurance to cover damage caused by a student. Many schools carry the coverage. Also, if the company has employment practices liability insurance, check whether it extends to interns.

Once the intern is on board:

  1. Manage interns as closely as employees, if not more so. The company can be held responsible for the actions of any workers, including unpaid interns, while they’re performing work for the company.  Courts will view interns like employees, as “agents” of the company.
  2. To ensure interns are paid correctly, maintain time records. To avoid the possibility of FLSA violations, companies who find themselves in the position of “employer” should ensure their interns accurately capture and are paid for all of their hours of work.
  3. Apply the company’s workplace policies to interns, for both consistency and good positive employee relations reasons.  Interns who are considered “employees” have all of the legal protections the regular employees have, and even unpaid interns may be able to pursue claims under Title IX, which bans sex discrimination in “any education program” or pursue common-law job-bias claims, such as infliction of emotional distress.