Every year, as millions of college graduates scramble to score jobs and start working their way out of the six figures of debt they incurred earning that newly printed diploma, millions more will take their first tentative steps into the professional workforce in what’s increasingly becoming a rite of passage for the right to open the door to the right jobs: the internship.
With summer just around the corner, many workforces are already beginning to see the seasonal swell that comes with the inevitable intern influx.
For many employers, however, the initiation of internship initiatives has a somewhat more sinister side, as some of the world’s biggest brands gamble millions of dollars on unpaid internships, a practice that represents a significant compliance issue that many organizations wantonly ignore, despite the obvious risks involved in this endemic practice.
But be warned: if your company maintains an unpaid internship program, you’re playing with fire. And this year, more than ever, you’re likely to get burned.
The crackdown on unpaid or underpaid internships has significantly escalated over the past few summers – and even organizations with the most sophisticated HR functions have found themselves caught in the non-compliance net.
Head of the Class (Action)
Consider the case of media giant Viacom, which owns such properties as Comedy Central, MTV and Paramount Pictures, who recently found themselves the latest mega-corp to enter into a costly settlement agreement with former interns.
While the company has not publically admitted wrongdoing, Viacom ultimately ended up agreeing to pay out over $7 million to members of a class action, including interns employed across subsidiaries in both their New York and California offices from 2007-2013.
This sum, of course, far exceeds the cost of having actually complying with internship compensation guidelines to begin with – and defeats the purported purpose of having interns to begin with, as these six years worth of top talent represented in the class action suit are probably unlikely to be continuing their careers with an organization that burned them before they were even full time employees.
So, if you’re recruiting or managing interns this summer, or work for a company with an internship program, take heed. The days of enterprise indentured servitude, the exchange of credit and experience in exchange for free sweat equity, are long past. This development has been a long time coming.
Internship Programs and the FLSA
In 2010, the U.S. Department of Labor published Fact Sheet #71: Internship Programs Under The Fair Labor Standards Act (FLSA), whose stated purpose is to “provide general information to help determine whether interns must be paid the minimum wage and overtime under the Fair Labor Standards Act for the services that they provide to “for-profit” private sector employers.”
That information must have been quite, well, informative, considering it catalyzed a wave of lawsuits and internship related litigation filed by former interns throughout the private sector – lawsuits which targeted some of the most blue chip brands and biggest employers in the U.S. Multiple multinationals, including Condé Nast, NBCUniversal, and Elite Model Management were forced to agree to pay out millions to former interns, most of whom were compensated with college credit while working alongside (and often performing identical job duties) with paid employees.
Much like classifying independent contractors, comparing the work interns perform to that which is expected of actual employees of the organization is a major factor in determining if the minimum wage and overtime provisions of the FLSA apply. In other words, if an intern looks like an employee, acts like an employee, quacks like…well, you get the picture.
Making Internships Pay Off: 6 Keys to Compliance
So, before taking the gamble and rolling the dice on recruiting unpaid interns, talent acquisition professionals might want to consider reexamining their own policies and reminding hiring managers or HR leaders of FLSA provisions – if for no other reason that if a requisition for an unpaid internship hits their desk, that recruiter assumes liability for a potentially costly compliance violation.
Which, if you like your job, is probably a position you don’t ever want to be in.
Here are some quick guidelines every recruiter or hiring pro needs to know to make sure that their intern recruiting targets the top talent at the head of the class while heading off any class action lawsuits:
- The internship, even though it includes actual operation of the employer’s facilities, must be similar to the training that would be given in an educational environment.
- The internship experience is for the benefit of the intern.
- The internship does not displace regular employees, but works under close supervision of existing staff.
- The employer that provides the training via an internship program derives no immediate advantage from the activities of the intern; on occasion, the internship might, in fact, actually impede said employer’s operations.
- The intern is not guaranteed, nor necessarily entitled, to a paid position at the conclusion of the internship.
- The employer and intern mutually agree that the intern is not entitled to wages for the time spent in the internship, and this understanding is established prior to the initiation of an internship.
If that req fails to meet any of the six factors outlined above, forget any aspirations you might have of having some starry-eyed college kid grabbing your coffee or being your gofer all day for free. As Katrina Kibben predicted in her post from earlier this year, “The Top 15 Employment Law Trends For 2015,” this is one of the biggest compliance issues facing employers today, and as the lawsuits keep stacking up this year – as do the massive settlement amounts employers must pay out to settle them.
This is one trend that’s not going anywhere. If, as many predict, the next major development is an actual enforcement action on unpaid internships by the Department of Labor itself, those already rising settlement numbers are going to look like chump change by comparison.
So, if you’re thinking about recruiting unpaid interns, think again.
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