Structuring summer internships

Summer is the season for swimming pools, baseball games, and interns. With college students seeking real-world experience and employers eager for the help, summer internships can be a symbiotic relationship. Internships can also generate some gray areas for employers when it comes to compensation. In June of 2013, unpaid interns won a major battle for compensation in the Black Swan case. Two interns from the set of the movie Black Swan brought an action against Fox Searchlight Pictures under the Fair Labor Standards Act (FLSA). The interns claimed that they were improperly classified as unpaid interns, and should have been paid interns, covered by the FLSA and entitled to minimum wage and overtime pay. These interns were responsible for running errands, tracking purchase orders and invoices, and making coffee and copies among other such tasks. The court agreed with the plaintiffs, and determined that they were misclassified and entitled to be paid in accord with the FLSA. Even though the interns understood they would not be paid when they accepted their position, this agreement had no effect on the court's ruling because the FLSA does not allow employees to waive their entitlement to their wages. In the Black Swan case, the court relied on a Department of Labor (DOL) Fact Sheet entitled 'Internship Programs Under the Fair Labor Standards Act' to assist in the determination of whether the interns should have received minimum wage and overtime for the services they provided. The Fact Sheet lists six criteria that employers should consider when deciding whether to pay interns or not. The Fact Sheet further directs that all of the six factors are to be met to avoid the minimum wage and overtime provisions of the FLSA. These six factors are:

1. The internship is similar to training which would be given in an educational environment. The more an internship program is structured around a classroom or academic experience as opposed to performing the employer's actual operations, the more likely it will be viewed as an educational experience.

2. The internship experience is for the benefit of the intern. The intern receives skills that can be used in multiple employment settings.

3. The intern does not displace regular employees, but works under close supervision of existing staff. If you would hire additional employees or require existing staff to perform the work of the intern, then the interns are more like employees and entitled to compensation.

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.

6. The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

As you craft summer internship programs, consider how to ensure these six criteria are satisfied if you do not want to pay your interns the applicable minimum wage and overtime for the hours they work. If it seems unlikely that you will be able to fulfill these factors, then minimum wage and overtime pay will be required. Also check applicable state laws, as they may differ from the FLSA. Iowa law, however, tracks with the FLSA. The penalties for misclassification of an intern can be harsh. The FLSA provides for lost wages, plus liquidated damages equal to one times the lost wages unless the employer can show it had good faith and reasonable grounds for believing it was in compliance with the FLSA. The FLSA also allows a successful plaintiff to recover attorney's fees and litigation costs. Reviewing these criteria, and ensuring compliance with them, can make for a more rewarding summer for interns and their perspective employers alike.

Iowa Employment & Labor Law Dickinson Law Firm Des Moines Iowa