Federal Internship Program Regulations – Unpaid Options Take Hit

New Federal Fact Sheet clarifies, complicates and reduces the number of internship opportunities for students.

Internships remain one of the best ways to enhance your education. They not only represent a great place to test the academic skills you have acquired in the job setting, they provide great learning experiences.

Interns continuously report that on the job training represents one of the highlights of their educational program. In some instances, students may be lucky enough to find a paid internship, but even unpaid opportunities can be truly beneficial.

However, during the recent downturn concerns have developed that businesses are taking advantage of students by replacing real workers with unpaid interns. Those concerns have led the federal government to recently provide a Fact Sheet regarding how internship programs should function under the Fair Labor Standards Act.

The fact sheet provides general information to help determine whether interns must be paid the minimum wage and overtime for the services they provide to ‘for-profit’ private sector employers. Unfortunately the overall impact has been a negative one for students.

Employment Test

According to the Fact Sheet, “Internships in the “for-profit” private sector will most often be viewed as employment” unless they pass the following six criteria.

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; and

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

If all of the six factors listed above are met, then according to the FLSA “an employment relationship does not exist.” In such instances, the Act’s minimum wage and overtime provisions do not apply to the intern and the internship can be unpaid.

Negative Development?

As it seems with all the legislation coming out of Washington in recent weeks, there are detrimental effects. According to the NY Times, many businesses have abandoned their programs altogether.

Not too surprisingly, many businesses are fearful that their unpaid option may no longer qualify under the new regulations. For those attempting to continue unpaid options, the question arises as to how a business can demonstrate their internship offers similar training that could be obtained in an educational setting and the employer is not deriving any immediate “benefit” from the intern’s work.

To be safe, some companies have converted unpaid options to paid positions. But in tight financial times, more paid options translate to fewer total internships overall.

It is important that students understand that one way certain businesses have attempted to comply with the rule is to demand that the student’s school grant credit if they hire the student for an unpaid internship. To ensure they can access such options, students need to fully understand their school’s policy towards internships.

First many schools limit the maximum number of total credits a student may accumulate through the internship process. That stipulation means students may need to pick and choose the internships they consider.

Of course, if your school will not give you credit and you still want to pursue a specific internship that you feel would be of benefit, you can check with the local community college, state university branch or even some foundations to see if they would grant credit. Many students have been successful in securing credit from outside institutions even if those credits are part of the bachelor’s degree process.

However, the demand for credit means that students will generally need to shell out some funds, and in some cases, full tuition costs to the university in return for those credits. Given the average costs per credit hour today, the unpaid internship could become a significant expense in addition to being unpaid.

Make the Effort

The new rules clarification means it will be more difficult for students to find those critical work experiences in the years ahead. But students need to persevere as they move forward.

The overall impact on a student immersed in a quality internship experience is priceless. For that reason, students should work with their college, and if necessary, other schools, to find a way to continue what is most definitely one of the most worthy educational practices they can be involved in.

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