Internship Programs and Corporate Risk

Posted by Jeff Pelliccio on Jun 2, 2017 9:00:00 AM

In ICS insights

In a previous blog post, we discussed the many benefits employers can realize when they implement formal internship programs. Those benefits include the opportunity for companies to "test-drive" the employer/employee relationship, the fresh perspective interns can bring to an organization, and more.
Of course, no discussion of benefits would be complete without a discussion of potential risks - internship programs are no different. 

Identifying Potential Risks

In recent years, there has been an increase in legal cases brought by unpaid interns, claiming rights as employees under the Fair Labor Standards Act (FLSA.)

The U.S. Department of Labor has guidelines designed to clarify when an intern is, or is not, considered an employee of the company (and, by extension, whether or not an intern has a claim under the FLSA). Those guidelines say that interns are not considered employees, and companies do not need to pay them, if all of the following tests are met:

  1. The internship is similar to training the intern would receive in an educational environment, even though it is "hands-on";
  2. The internship is for the benefit of the employee;
  3. The intern works under close supervision of existing company staff, and does not displace other, paid workers;
  4. The employer isn't receiving any immediate advantage from having the intern there (and may in some cases be disadvantaged);
  5. There is no promise of a permanent job at the end of the internship; and
  6. Both the intern and the employer understand the internship is uncompensated.

In recent years, some courts have interpreted these guidelines differently, focusing primarily on whether the employer or the intern actually benefited most from the internship. A company that benefits substantially from an unpaid internship program is likely to be held accountable for compensating interns and meeting other obligations inherent in an employer/employee relationship. 

How Employers can Protect Themselves

Employers considering starting internship programs should carefully evaluate the following elements of their plans, to avoid potential legal risks in the future.


In most cases, employers can lower or eliminate their risk of legal actions by paying interns at least the minimum wage for their hours worked. While there is some leeway for public service or non-profit companies, unpaid internships are more likely to give rise to FLSA claims, as discussed above.

Workers' Age Considerations

Employers hiring high school students as interns also need to make sure they are in compliance with state and federal child labor standards. When interns are at least 18 years old, child labor standards no longer apply. 
On the flip side, employers should make sure they are not discriminating against a potential intern because he or she is older than other applicants for the internships, as this can give rise to age discrimination suits.

Apply Internal Rules Uniformly

Sometimes, both interns and supervisors are under the impression that company policies don't apply to interns. Being clear in your messaging, letting everyone in the organization know that your firm's harassment, confidentiality, social media and other policies apply equally to interns and "regular" workers, can help avoid issues down the road. 

Maintain Records

Companies employing interns can also lower their risk of legal action by preparing and having interns sign a document that explains both the employer's and the intern's understanding of the nature of the internship, including the limited scope of the intern's responsibilities, the education nature of the program, whether or not the position will be compensated, and that the intern has no expectation of an ongoing job after the end of the internship. 

Audit the Program

Finally, employers with internship programs should conduct periodic audits to identify any potential issues. This is especially important for companies that maintain unpaid internship programs. 

ICS can Help with all of Your Staffing Needs

Bringing interns into your business through a formal internship program can be a great way to grow and foster talent for your company. When you keep the above risks and mitigation tips in mind, you can be confident knowing you have safeguards in place to protect your organization. 

At ICS, we know that every company's staffing needs are different, and that those needs can change without much notice. As a recognized leader in the staffing industry, we go the extra mile to help ensure you fill your open accounting & finance, compliance & legal, information technology and corporate support positions with candidates who are pre-screened and qualified. 

To learn more, contact ICS today in New York, Washington D.C., Fort Lauderdale, Chicago, Dallas, Houston Minneapolis or Denver. 
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