Virginia Business Law Update : Virginia Business Lawyers & Attorneys : PCT Law Group : Litigation Defenses, Contract Disputes, Business Formation : Northern Virginia, Arlington, Fairfax, Alexandria

In today’s tough economic environment, employers are looking for creative ways to reduce their overhead. And, what could be more appealing than an unpaid intern who can assist with getting the work done? With this year’s financial crisis, there is no shortage of such labor for employers. Many people are willing to work for little or no compensation in order to prevent a big gap of employment or build a resume. However, unpaid interns can create legal troubles for the unwary business owner. Federal labor laws governing internships provide that the relationship has to benefit the intern more than the company. If it doesn’t, then the employer must comply with the Fair Labor Standards Act (“FLSA”) by paying minimum wages and possibly overtime.

As many employers already know, there are many advantages to using an intern. If you are faced with a tight budget for personnel, interns may help fuel growth for your company. But, you need to be sure that your main purpose for hiring an intern isn’t to avoid paying wages. The U.S. Department of Labor’s Wage and Hour Division outlined a list of criteria to determine whether a trainee or intern is an “employee” under the FLSA, and thus, must comply with Federal wage laws.

The following criteria provide guidance in evaluating internship programs for for-profit organizations, but it is important to note that each program is unique and must be carefully examined:

• the training, even though it includes actual operation of the facilities of the employer, is similar to that which would be given in a vocational school;
• the training is for the benefit of the trainee;
• the trainees do not displace regular employees, but work under close observation;
• that the employer that provides the training derives no immediate advantage from the activities of the trainees and on occasion the employer’s operations may actually be impeded;
• the trainees are not necessarily entitled to a job at the completion of the training period; and
• the employer and the trainee understand that the trainees are not entitled to wages for the time spent in training.

If your company’s internship program does not satisfy all of the above criteria, your interns may be considered “employees” under the FLSA. Hiring an intern, which qualifies as an “employee” may cost your company thousands in unpaid wages and legal fines. So, how do you ensure compliance? Establish a written internship program outlining the terms and structure of the relationship in a way that the intern is receiving the full benefit of the learning experience, and ensure that your managers and other employees properly implement it.
 

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