Unpaid Interns and the Risk to Your Business
UNPAID INTERNS AND THE SIGNIFICANT LEGAL RISKS THEY IMPOSE AS MISCLASSIFIED INDIVIDUALS
Spring is coming soon, followed by young (over 18) students looking for part time or summer jobs. Often a business will offer unpaid internships as a way to maximize their labor force while keeping costs low during the summer. However, if the correct steps aren’t taken to ensure that these individuals are properly classified as interns (whether paid or not), employers could find themselves in hot water and have “employees” on their hands, and all the attendant tax, human rights protections and wage and hour issues that attach to that status.
Effective January 1, 2015, Illinois passed an amendment to the Illinois Human Rights Act which gave unpaid interns the same protections against workplace sexual harassment and other forms of discrimination as are afforded regular employees. Under the law, an unpaid intern is someone who performs work for the benefit of the employer and (1) there is no commitment or expectation that the individual will be hired by the employer at the end of the work term; (2) there is a firm agreement between the employer and the employee that the work will be performed for no wages: and (3) the work performed meets the following criteria:
- It supplements training in an educational environment that will enhance the individual’s employ-ability;
- It benefits the individual;
- It does not displace regular employees;
- It is performed under close staff supervision; and
- It provides no immediate advantage to the employer.
Under the wage and hour laws, specifically the federal Fair Labor Standards Act and well as the Illinois Minimum Wage Act, any individual who is “suffered or permitted” to work must be compensated for that work. That would include all interns that are performing work on a paid basis. That means that these paid interns, like all “regular” employees, if they are non-exempt, must be paid their regular wages for all time worked up to 40 hours in a single work week and paid at a rate of time and a half for any hours worked over 40 in a single work week.
The issue that employers need to be wary of involves unpaid internships. It is far too easy for an employer to take on summer help or hire someone for a specific project under the guise of an unpaid internship. The employer honestly believes that they are offering a student on opportunity to gain valuable on the job training. However, if the internship program is not properly structured, an unpaid internship program can expose an employer to liability for wages that should have been paid, tax withholding that should have been taken out, and overtime if work exceeds more than 40 hours in a single work week.
There are certain circumstances where an employer may offer training programs or internships on an unpaid basis without running afoul of the wage and hour laws. The determination of whether or not an internship program would qualify for the exemption for unpaid interns involves the same factors listed above which Illinois also follows. If these criteria are met, then an employment relationship is not established under the wage and hour laws and no minimum wage or overtime liability exists.
Misclassification of an intern due to a poorly designed program can expose an employer to unintended and substantial risk. If you are contemplating an intern program for the summer, please call an employment attorney at our office to ensure you aren’t going to end up paying for your unpaid internships!
With over 30 years’ experience in advising individuals and businesses on labor and employment issues, such as OHSA fines, let Boznos Law work with you to ensure you are ready to meet the challenges posed by the ever changing employment law landscape. Call Bill Boznos today at (630) 375-1958 or contact us through our website at www.boznoslawoffice.com