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Working with Interns this Summer? Know the Business Risks

1. July 2013 14:07

Last week, a New York federal judge ruled that two production interns should have been paid for their work on the movie Black Swan.In the case Glatt v. Fox Searchlight Pictures, the judge determine that two production interns should have been paid as Fox employees for their contributions to the Oscar-winning film. The ruling asserted that the interns’ work (which involved getting lunch, filing, running errands, delivering paychecks, and the like) included tasks that displaced a regular paid employee. (For other big business changes in 2013, see "The Cost of 3 Major Changes Small Business Owners Face.")

Federal law stipulates that, in order to be classified as an internship, a position must involve strictly educational tasks that benefit the intern more than the company he or she works for.

The judge said that although the interns benefitted from the position appearing on their résumé and the networking opportunities that followed, they weren’t any benefits that a paid employee wouldn’t be subject to, too. Fox is trying to overturn the ruling, but right now it has to compensate the interns who filed suit for their time at a rate of at least minimum wage. 

This ruling marks the first time the “modern” internship has been deemed illegal in court, and is sure to set forth a tidal wave of caution for businesses offering internships in America. As you continue in summer mode, take a moment to make sure your business is following the federal guidelines on unpaid internship so you can avoid unpleasant and potentially costly liability lawsuits down the road. 

Federal Guidelines for Unpaid Internships

The U.S. Department of Labor set six requirements that for-profit businesses must follow in order to legally offer unpaid internships. Here’s a quick checklist to make sure your internship program is legal:

  1. The internship is structured like a class or other educational training program
  2. The intern benefits more than your company.  
  3. There is an existing employee to mentor the intern
  4. You do not replace a paid employee with an unpaid intern
  5. You do not promise a job at the end of the program.
  6. Both you and your intern know they will not be paid. 

If you’re hoping to have an unpaid intern work for your business, you have to meet all six of the above criteria. Basically it’s just a bad idea to equate “unpaid intern” with “free work.”

3 Steps to Creating a Flawless Unpaid Internship Program

Here are some tips to insure your unpaid internship program both benefits your small business and your intern keeps you clear from any potential legal risks.

  1. Create a Curriculum for Interns. Allowing an internship program to follow the daily path of business operation can tempt business owners into pulling in interns to help with overwhelming work.  (Understaffed? See "Top 5 Risks for Understaffed Businesses") Before hiring interns, outline skills that are integral to the field of work the internship is directed.
    Use these skills to develop a day-to-day progression of lessons that allow for an educational program based upon what your business does – this is especially easy if you know the exact start and end dates of your interns. By having the interns on their own schedule apart from the normal operations of the company, you lessen the risk of being at fault for designating assignments that a paid employee would do. 
  2. Talk with an Attorney. While knowing the criteria for unpaid internships is a start, it’s never a bad idea to talk with your attorneyto see if you’re following all the right rules. Talk about writing up an employment agreement that will hold legal weight and get everyone on the same page about expectations.
  3. Designate a Mentor. Giving an intern a one-on-one relationship with someone who’s already part of your business can provide a great learning opportunity, especially if the mentor has already established a career. This also makes one person accountable for ensuring that an intern has an educational experience.

Paying Interns Less = You Paying More? 

Though unpaid internships might seem like a good idea to advance your small business while giving back to the new generation of professionals, it actually might be less of a risk to pay your summer interns, especially if you’re a one-man band. The costs of payingestablished employees to supervise interns as well as do their regular duties, along with and the time (and therefore money) it takes to establish an educational program, can actually be more expensive than just paying your intern. In fact, paying your intern will not only make the experience more beneficial for them, but will help your business’s bottom line.

By offering a paid internship, your small business will attract a more competitive pool of applicants as no one is excluded for financial circumstances. Your interns won’t have to work two or three jobs, and can fully commit themselves to the company goals, raising your productivity level. (Have some stressed regular employees? Read "Employee Wellness Programs for Small Business.") And since they’re getting paid, you can give them work that not only is educational, but benefits your company too – without the risk of a lawsuit. 

know your business risks

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