EMPLOYERS BEWARE: WHAT YOU NEED TO KNOW ABOUT PAYING INTERNS

Many employers hire high school or college students, or recent graduates as interns. The internship model is simple: the employer gives the intern experience, a good reference and something valuable on their resume, and in exchange, the intern provides some service to the employer that enhances its business. In most instances, the intern is either given a weekly stipend or no wages.

Today this model has changed and employers may find themselves at huge financial risk for not paying interns. Based on recent decisions by several federal appeals courts, interns who provide services for employers are often entitled to be paid standard wages, including minimum wage and overtime. If an employer chooses not to pay its interns, and thereafter the intern files a lawsuit or Department of Labor claim, the employer may be responsible for the full wages of all interns it has retained for a 2 to 6 year period (depending on whether federal or state law applies). If the employer also fails to document the intern’s actual hours worked, the amount of wages owed could be staggering. Notably, the employer could also be responsible for liquidated damages (double the amount owed).

In determining whether an intern is entitled to be paid, Courts generally consider several factors, including:

• The intern’s expectation of receiving regular wages;
• The extent to which the intern program provides training similar to what they would receive in an educational environment;
• Whether the intern receives academic credit for the internship;
• The degree to which the intern’s work displaces other paid employees.

Ultimately, in each case the Court or Department of Labor would engage in a fact-specific analysis to determine the status of the intern and their entitlement to appropriate wages.

Before hiring an intern, contact us to discuss how to handle their compensation.