• Internships - A Teachable Moment
  • March 20, 2015 | Authors: Brian J. Renaud; Deanna Swisher
  • Law Firms: Foster, Swift, Collins & Smith, P.C. - Farmington Hills Office ; Foster, Swift, Collins & Smith, P.C. - Lansing Office
  • Internships are a beautiful thing. They can provide a student with invaluable experience. If you are working with an intern or you were interested in offering an internship, please read on.

    If you need a hand with your work as you are launching your design business, and you thought an intern would be a great way to get free labor, think again. Calling an employee an intern, as a way to cut costs, is a really bad idea and will expose your business to the wrath of the U.S. Department of Labor (“DOL”). Generally speaking, an internship in a “for-profit” private sector business will be viewed as employment unless the relationship meets the following six factors: (1) the internship is similar to training which would be given in an educational environment, even though the intern is involved in the “actual operations” of the employer; (2) the internship experience is for the benefit of the intern; (3) the intern does not displace regular employees, but works under close supervision of existing staff; (4) 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; (5) the intern is not necessarily entitled to a job at the conclusion of the internship; and (6) the employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

    These factors are applied on a case by case basis, to determine whether the relationship is in fact an internship. If all of the six factors are met, the individual is an intern. However, as an “exclusion” from the minimum wage and overtime requirements of the Fair Labor Standards Act, the internship exclusion is interpreted narrowly. If, in the view of the DOL, the factors are not met, the individual is an employee. The consequences for misclassifying an employee as an intern can include administrative penalties and damage awards, which typically include payments for back wages (including overtime), interest on those wages, liquidated damages (meant to punish employers for non-compliance), attorneys’ fees, costs and witness fees, unpaid taxes and unemployment insurance contributions, and personal liability.

    For further explanation of the six factors, take a look at Fact Sheet 71 on the DOL’s website.