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Work for Free? The HR Challenge: Employer-Intern Relationships

The views expressed are those of the author and do not necessarily reflect the views of ASPA as an organization.

By Joe Jarret and Kim Napier Murray
May 1, 2015

Internship Dynamics

When Jill interviewed as an intern last summer with a nonprofit agency the chief executive officer (CEO) was thrilled that the nontraditional student had already been working locally as a registered nurse (RN). His plan was to have her complete in-home evaluations for employees hired by the agency to assist elders to “age in place.” The evaluations of the care givers were usually completed by an RN and the evaluation process was dreadfully behind.

Jill had trepidations about spending the entire summer helping the agency catch up on evaluations. Her main goal was learning new skills working in nonprofit management. The fact that she was not being paid was also a concern. However, she hoped the experience of working with a large successful nonprofit agency would place her in a leadership position upon graduation.

As her hopes appeared dashed, she spoke to her university proctor about her prospects. It was decided that Jill should be transferred to another facility where she would shadow the CEO of a community hospital in her daily managerial duties.

  • Was Jill wrong to question the intent of the first nonprofit agency?
  • When might unpaid internships be beneficial to an intern?
  • What laws protect them from being used in an employee capacity without the benefit of being paid wages and earning overtime?

These are questions that are often over looked by managers and directors looking to attract interns. Further, the recruitment and management of interns is often done without input from the HR team.

The HR Challenge

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Unpaid internships can be mutually beneficial to an agency as well as the intern. As students seek employment opportunities with limited job experience, soft skills such as team work and coming to work on time may be helpful. Learning computer skills and telephone etiquette can be useful in future careers. Yet, with 750,000 unpaid interns working each year to gain experience in their field of study, public sector, nonprofit and for-profit companies are being challenged to “prove” that student interns are not being exploited and that employees are not being displaced by having interns do work that is usually completed by a paid worker.

The definitions of “trainee” and “intern” have become blurred over the years. This has prompted the United States Department of Labor (DOL) to issue Fact Sheet 71, which outlines a six item test to determine whether a trainee is entitled to compensation from the company that “employs” her or him. Consequently, internship programs under the Fair Labor Standards Act (FLSA) apply the following six criteria to programs to determine whether interns must be paid the minimum wage and overtime:

1)    The internship, even though it includes actual operation of the facilities of the employer, is similar to training which would be given in an educational environment.

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.

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

If all the above factors are met, an employment relationship does not exist under the FLSA and the Act’s minimum wage and overtime provisions do not apply to the intern.

The courts look at other factors as well in deciding whether a student intern is working as an employee and should be compensated. When part of an academic experience provides certain benefits (e.g., the intern receives college credit upon completion of the internship) then the intern can be considered a trainee.

As internships have become common practice in for-profit and nonprofit entities, it is wise for the two parties to come to a verbal, and perhaps written, agreement stating the expectations and compensation for a student intern. Both for-profit and nonprofit organizations must be aware of their states’ wage and hour laws and seek guidance from the DOL related to whether unpaid interns are exempt from minimum wage and overtime laws. To comply with the state’s laws, consultation with legal counsel is recommended.

Internships associated with university credit, and therefore necessary for an academic degree, can be beneficial to both the student and the organization. However, the savvy human resources manager will insure that their entity does not engage in conduct that gives the intern an expectation that he or she will be hired on a permanent basis at the end of the internship. Not only are interns are an inexpensive way to try out new talent, but they often bring with them fresh insights and perspectives that can benefit the organization. Just make sure that your entity does not become dependent upon the work of the intern. Doing so can quickly turn that intern into an employee.

AuthorJoseph G. Jarret is a public sector manager, attorney and mediator and former United States Army Armored Cavalry Officer who lectures on behalf of the Master of Public Policy and Administration program in the Department of Political Science at the University of Tennessee, Knoxville. He is the 2013 president of the E. Tennessee Chapter of ASPA.

AuthorKim Napier Murray received her Nursing Diploma from Crouse Irving Memorial School of Nursing in Syracuse, New York. She earned her BA in Psychology and MPH from University of Tennessee, Knoxville. She lives in Knoxville, Tennessee with her husband and three children and enjoys hiking in the mountains and boating.

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