With the end of school approaching, companies wanting to hire a summer intern should develop a plan. According to the Department of Labor (DOL), interns must be paid minimum wage and overtime unless they meet ALL six criteria to be an unpaid trainee. Whether a paid or unpaid internship, there are many things to consider.
According to the Fair Labor Standards Act (FLSA), the DOL has a fact sheet detailing each criterion that must be met for a company’s unpaid internship program to qualify for exclusion. In general, the internship must provide the intern instruction similar to what they’d receive in the classroom. The employer does not reap advantage from the intern’s activities and in fact, working with the intern may occasionally slow down operations. The skills learned can be used in other employment settings beyond the internship. Often this type of unpaid internship is developed with oversight from a college or university as a program requirement and/or with educational credit.
Do the same requirements apply to nonprofit organizations? It’s less clear. The DOL fact sheet states unpaid internships are “generally permissible” for a “nonprofit charitable organization.” “Generally permissible” is not defined by the DOL. That leaves a nonprofit organization vulnerable to an FLSA claim from an unpaid intern. Another consideration is defining the role as an intern or volunteer. A volunteer works without expectation of being paid but the organization can pay work-related expenses and a stipend. The stipend may cause the DOL to classify the volunteer as an employee, which requires them to be paid minimum wage. The nonprofit would also be responsible for any back taxes. By reimbursing expenses but forgoing a stipend, nonprofits can guard against this liability.
It’s important to develop a paid internship program that reflects your company values. Are you looking for affordable help or is your company dedicated to educating and financially supporting students interested in your industry? Research your marketplace to understand the industry standard for wages. By law, FLSA guidelines require minimum wage and overtime pay. If you’re looking to attract top candidates, consider paying more than the industry standard. A paid internship can be used as a trail period before offering them full time employment.
MidwestHR, a top professional employer organization (PEO) in Illinois, has been helping clients with these kinds of HR questions for 20 years. By outsourcing your HR with us, we help you develop an internship program that brings value to students and your business while protecting your organization from liabilities. Interns can bring a fresh perspective and perhaps a future business leader! Give us a call 630-836-3000 to discuss the type of internship program you’d like to develop.