Thursday, February 6, 2014

The Changing Landscape for Interns and Temps

We recently reviewed our practices in hiring temporary employees and interns and I thought I'd share some of what we discussed. 

First, the what.

We don't hire any "temporary" employees directly anymore. We use an agency. We have good relationships with the agencies we work with and they will payroll someone for us if we have identified a person. We are also hiring people more often for defined periods of time with full benefits e.g., six months or a year to work on a project.

We are paying our interns based on the assignment and the experience they bring to the role. Internships correspond to the seasons and are no longer than 120 days. We have a policy of not placing interns in the same area as a friend or family member. It reads“students will not be assigned to work in the same unit or supervisory chain as family members or friends.”

Now the why. 

The Six Prong Test and the Fox Case

Traditionally the Labor Department’s Wage and Hour Division’s has used a six-prong test to determine the legitimacy of an unpaid internship. To qualify:
  1. The internship must include a significant training component
  2. It must be for the intern’s benefit
  3. It must not displace paid employees
  4. The employer must derive NO immediate benefit from the intern’s activities, an on occasion its operations may actually be impeded
  5. The intern must not be promised a job at the end of the internship
  6. The intern and the employer both must understand that the position is unpaid
Many employers structure their internship programs around educational credit to minimize their legal liability, but that provision may not offer the protection they desire. A case last June has caused employers to think a bit a bit more seriously about this issue. A federal judge in New York ruled that Fox Searchlight Pictures violated minimum wage and overtime laws by not paying interns because they:

  • Did the same work as regular employees
  • Provided a benefit to the employer
  • Performed low-level tasks not requiring specialized training

The standard is stricter for for-profits. Unpaid internships in public and not-for-profit charitable organizations are held to a lesser standard. You would expect C3’s have more leeway than C6’s, but I haven't seen any real guidance on this. 

Many employers are choosing to pay interns to avoid potential problems. SHRM survey conducted during the summer of 2013 indicated 86% of respondents pay interns at the undergrad level. A quick poll of my colleagues in other large associations indicated that 60% pay interns in some fashion -- either an hourly rate or a stipend. (Note: A stipend may not minimize legal risks.)


The ACA recognizes only four categories of employees:
  1. Full-time (30 hours per week or 130 hours in any given month)
  2. Seasonal (spring, summer fall, winter with duration of less than 121 days)
  3. Variable hour (hourly employees who may work more or less than 30 hours per week)
  4. Part-time (always working less than 130 hours per month)
People in jobs that you used to classify as "temporary" or "internships" who work 30 or more hours per week will be considered benefits eligible going forward unless they are seasonal. "Seasonal" hasn't been real clearly defined as of yet, but the example given is that of a ski instructor. Internships that correspond with the semesters and last less than 121 days might legitimately be classified as seasonal, but it's still not completely clear.

As a result of the ACA, some employers are capping the number of hours part-time employees work to keep them below the 30 hour threshold where they would become eligible for health insurance.

The Economic Divide

Unpaid internships are widening the nation’s already critical economic divide. When you offer an unpaid internship, you narrow the field to only those people who can afford to work for free.


Another thing worth considering is how you recruit interns. Accusations of nepotism to secure internships can be harmful to organizations and the accusations were flying in DC last summer.

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