Intern Labor Laws: To pay or not to pay

By Adam Robinson,
December 13, 2012

It was the sigh (of relief) heard ’round the world as college students everywhere put down their #2 pencil and handed in the last final. Now that the semester is over, we won’t be thinking about school for the next six weeks! Just as all of us students won’t be worrying about next semester until, well, next semester; hiring managers aren’t exactly pursing potential interns for the next semester either.

But when it does come time to begin the search for interns, the first step is to determine whether you want to hire a paid or an unpaid intern. From that point on, it is imperative that all Department of Labor laws are upheld. After all, you don’t want to end up in that same messy legal battle Hearst Corporation found themselves in. 

So, what regulations have the Department of Labor put into practice regarding interns?

1. Determining if your intern is strictly an intern or an employee

Does your agreement with the “intern” meet the definition of an “employee” under the Fair Labor Standards Act? If you find that the “intern” does fall under these definitions, by law they must be compensated for all hours worked in accordance with federal and state minimum wage and overtime laws. This also applies for “interns” who are brought on the team in place of hiring a “regular” employee.

2. Meeting the criteria for an unpaid internship

In order to be exempt from minimum wage laws, the internship must meet all of the following criteria:

  • The internship is structured around an academic experience rather than around the daily operations of the company. This way, the internship is more likely to be seen as an extension of the classroom.

  • The intern is provided with skills and knowledge that can be applied to multiple employment settings, not just within that specific company.

  • The internship is for the benefit of the intern, not the employer. In other words, the intern should only be working on projects which will further their knowledge. And not just knowledge of how the copier works!

  • A fixed duration must be agreed upon prior to the start of the internship. However, this shouldn’t be used as a “test drive” for individuals looking for employment upon the completion of the internship. 

3. Paying an hourly wage vs. a stipend

For “interns” deemed employees by the Department of Labor, it a required that they are paid at least minimum wage. On the other hand, for “interns” who are really just interns, you are not legally obligated to pay them; however, it is acceptable to pay them a stipend as long as it is within reasonable approximation of the expenses incurred by the intern. 

When in doubt, double-check the laws. Many companies have found great success bringing “interns” and interns on board!

They may just be an intern today, but 30 years from now, they may be CEO…

About the Author

Adam co-founded Hireology with the mission to help growing companies make better hiring decisions through data and better technology. Adam is passionate about entrepreneurship, donating time to a number of organizations that support the entrepreneurial cause. Adam completed his undergraduate study at the University of Illinois at Urbana-Champaign, and received his MBA from DePaul University in Chicago, IL.

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