The Potential Liability of Hiring Interns

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Once you’ve made the decision to hire an intern, you must sit down with the list of responsibilities and determine their rate of pay. Your intern will be unpaid you say? Think it over before you make that hire.  A recent Forbes article on intern lawsuits may have you pulling out the checkbook.

Self-admittedly overstated, Cameron Keng, author of the above mentioned Forbes article, realizes the threat of a lawsuit is a big enough deterrent for some organizations to decline the notion of hiring interns or co-op students. “Frankly, the companies that are hit with these lawsuits are usually the only ones to blame for their predicament.” Online newsroom site ProPublica highlights a running tally of lawsuits from former company interns suing for damages such as back wages. Keng says, “It’s not surprising these companies are being sued, considering that fashion and film are industries where unpaid internships are the norm and they usually involve menial work.  But, they’re not the only industries that are being hit by these lawsuits.  Publishing companies such as Hearst, who owns ELLE, Cosmopolitan, Marie Claire, Esquire and The Oprah Magazine, also lost a lawsuit filed by their former interns.”

Large organizations, knowing that students will accept and complete work on an unpaid basis, simply to gain experience and show their status with a reputable company on their resume, may not even understand that under most circumstances, these employees are entitled to at least minimum wage. In Walling v. Portland Terminal Co. (1947), the Supreme Court outlines six requirements to satisfy in order to qualify for an exemption from paying interns:

  • 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;
  • The internship experience is for the benefit of the intern;
  • The intern does not displace regular employees, but works under close supervision of existing staff;
  • 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;
  • The intern is not necessarily entitled to a job at the conclusion of the internship; and
  • The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

Even when the student is earning college credit, a valid argument in certain circumstances, employers need to be cautious when they decide to forego payment of wages. Keng argues that at average minimum wage and a full-time workweek, the average intern would earn less than $3,500 for the summer, equivalent to only 12 billable hours to an average attorney fighting a potential lawsuit. In most instances, the cost of minimum wage is going to be worth the elimination of liability.

Further in his article, Keng details why hiring an intern might not be valuable at all. With unemployment still high in certain areas of the country, he suggests filling the gaps with these individuals. Solid advice if you need a long-term hire, rather than busy season assistance, and also assuming that the out-of-work labor force has the required education and skill set you’re looking for.

In the end, it is a matter of circumstance. Hiring interns is the more lucrative, older brother of the temp-to-hire industry. Find the motivated, eager-to-learn college student and mold them into what you see for your company’s future. If they aren’t a fit, no need to fire them. You can select another high potential next summer. And, whatever you do, figure out a way to pay them.

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