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The Letter of the Law

This story accompanies Internal-Affairs, a feature about today's interns -- who are no longer viewed as gofers or grunts, but, increasingly, are looked upon as tomorrow's employees.

Sunday, March 2, 2008
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A poorly run internship program not only puts a company at risk for recruiting difficulties, it can also run it afoul of the federal Fair Labor Standards Act. Under the Act, employers are required to compensate all employees with at least minimum wage. The key lies in determining whether an intern is truly an intern or an unpaid employee.

"Simply labeling somebody an intern doesn't automatically make them so," says Marc Zimmerman, partner in the labor and employment law department at Phillips Nizer LLP in New York. "Whether interns are considered employees under the Fair Labor Standards Act depends on the circumstances surrounding their activities."

In order to be considered an internship, a program must meet six specific criteria, as laid out by the U.S. Department of Labor. Zimmerman offers the following interpretations of the sometimes confusing requirements:

1. Intern Receives Training Equivalent to a Vocational School -- "That's just a glorified way of saying that, even though your training involves actual operation of company facilities, the individual could get this training elsewhere if he or she paid for it."

2. Intern Benefits from the Experience -- "The intern should be getting the practical benefit of being on-the-job in a workplace environment."

3. Intern Must Not Displace a Regular Employee -- "If an intern is providing an essential service that others are normally paid to do, that's a red flag that they are actually an employee and entitled to payment for all hours worked, even if you have labeled them an unpaid intern."

4. No Immediate Advantage from the Intern's Activities -- "Not only may the employer not derive any significant benefit, but there may actually be a hindrance of operations because of the amount of time that you need to commit to train and supervise an intern."

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5. No Guarantee of a Job -- "Internship programs are often used as recruiting techniques, but the key is that the intern is not necessarily entitled to a job at the completion of the internship."

6. Mutual Understanding of Unpaid Status -- "If you don't intend to pay an intern, that should be front and center. In fact, both parties should be signing something that says, 'I understand that this is an unpaid internship.' "

Zimmerman cautions employers to adhere carefully to the six criteria, as failure to meet even one could result in significant fines and penalties. "You could find that you're required to pay 125 percent of all wages plus attorneys' fees on behalf of an intern who you thought you weren't supposed to be paying in the first place."

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