If you are hiring – or have hired – summer interns, you need to do the requisite “summer reading” on whether or not you need to pay them. Traditionally, most interns worked over the summer for the experience and to build their resume. However, unpaid internships have gotten a little more complicated from a legal perspective in recent years.
The Department of Labor’s (DOL) Fair Labor Standards Act (FLSA) mandates that interns in the “for-profit sector who qualify as employees rather than trainees typically must be paid at least the minimum wage and overtime compensation for hours worked over forty in a workweek.”
There are some instances where interns may not have to be compensated. These interns must “receive training for their own educational benefit” and must meet the following six criteria:
- 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.
- 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.
- The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.
Essentially, if an employer is not providing educational training, the intern must be paid.
The question of how to compensate interns or not is further complicated by the Affordable Care Act (ACA). The ACA defines a full-time employee as a person working 30 hours per week or more and does not make an exception for interns. This means that if interns are paid and working more than 30 hours per week, they are largely eligible for insurance coverage. Employers should check Summary Plan Descriptions as well as Certificates of Coverage to make sure that eligibility is clearly and consistently defined.
Summer interns do not qualify for the ACA if they fall into one of the two exceptions the ACA provides – seasonal employees and variable-hour employees. Seasonal employees fall under the DOL definition when they begin work at generally the same time every year and their employment is limited to a season. If seasonal and variable-hour employees work more than 30 hours in a week, but don’t average 30 hours a week over the duration of their employment term, they are not eligible to receive benefits.
The Society of Human Resource Management (SHRM) Online provides the following guidelines to ensure that your intern program complies with the DOL definition of seasonal and/ or variable hour employees:
If you intend to define interns as seasonal employees, clearly state that in their offer letters and make sure that their actual employment follows suit.
Work closely with your broker and legal counsel to ensure internships are compliant. The ACA regulations around benefits eligibility are complex and amendments are still being issued, so it’s important to have expert counsel in making sure that your company’s HR practices are on point. (MarathonHR can help!)
Monitor the work and hours of interns closely and remember that they should not be considered a long-term substitute for hiring regular employees.
As an employer, you might also consider looking at internship programs that are administered externally. I was recently introduced to TAG Ed, an organization dedicated to providing students with relevant, hands on STEM learning opportunities. Students 16 and older may participate in their Summer Internship Program to gain real-world experiences. The internship is for five consecutive weeks with interns working an average of 20-30 hours per week. Students are paid $200 per week by their host company for a total stipend of $1,000 at the end of their assignment.
TAG Ed has placed more than 500 students in companies throughout Metro Atlanta over the last six years. Students are selected through an application process. This summer, they had 2,000 applicants for 175 placements. TAG Ed works with host companies to define projects the students can accomplish.
Summer internships can be extremely beneficial for the company and the intern. Employers simply need to define their internship program concisely and in compliance with federal labor laws. If you need assistance developing an internship program for your business, please call us at 678-208-2802.