Proper Planning is the Key to Creating Successful Internship Programs

Hiring interns can provide companies a great pipeline for identifying and developing talent. Interns get benefits too — they gain knowledge and skills that will aid them in job searches.

So why may companies be hesitant to use interns? Often it is because companies struggle to determine whether someone is really an unpaid intern or an employee who must be paid wages, or they do not know how to design and implement an internship program.

Identifying who is an intern just got a bit easier. In 2018, the U.S. Department of Labor issued new guidelines to help for-profit employers determine whether an employment relationship exists with a student or intern, in which case the individual is entitled to minimum wages and overtime pay.

The guidelines set forth seven factors to identify the primary beneficiary of the relationship. If the primary beneficiary is the employer, the employer must pay the intern in accordance with applicable wage laws. If the primary beneficiary of the relationship is the intern, the employer is not required to compensate the student or intern.

The seven factors are:

1. The extent to which the intern and the employer “clearly understand that there is no expectation of compensation”
2. The extent to which the internship provides training that would be given in an educational environment
3. The extent to which the internship is tied to a formal education program by integrated coursework or receipt of academic credit
4. The extent to which the internship corresponds with the academic calendar
5. The extent to which the internship’s duration is limited to the period when the internship provides beneficial learning to the intern
6. The extent to which the intern’s work complements, rather than displaces, the work of paid employees while providing the intern with significant educational benefits
7. The extent to which the intern and the employer understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship

No one factor is controlling, and determinations must be made on a case-by-case basis. However, some basic tips to follow in all instances include not promising compensation to the intern during the internship or after, not allowing the intern to perform work that would otherwise be done by a paid worker, and ensuring that the internship program has strong educational components that are documented.

As the seven factors for determining intern status suggest, internships require planning — not just to ensure no compensation is due if the internship is unpaid, but to ensure that the internship is a true beneficial learning experience for the student or intern and that it provides value to the employer.

Any internship program should serve a business purpose. The key to identifying the purpose is to think strategically about long-term benefits, not short-term gains.

Is the goal to showcase the company’s brand? Is to develop a talent pool? Is it to provide training and leadership opportunities for employees? Is it to solidify business relationships with clients, prospective clients, and/or vendors and provide them with insight to the company’s workings?

The purpose can be varied and multifaceted and depends upon the company’s mission.

Next, the company should determine who should be recruited for internships. A solid internship program may draw on schools and/or universities for interns. There even may be opportunities to partner with these entities and develop a curriculum that applies real-world training applications to the theories being taught.

Another approach may be to offer internships to client or vendor contacts to help strengthen business ties through education about how the company operates and the opportunities it provides.

Once the company determines the business goal for its internship program and the potential pool of interns, the company should plan a thoughtful program for the interns.

First, establish start and end dates for the program and coordinate those dates with the academic calendar.

Second, design the program’s contents, always keeping in mind that the program must be designed to primarily benefit the intern. The program can consist of lectures and presentations, workplace shadowing, field trips to clients or vendors, and formal and informal meetings.

The intern should have a mentor to oversee the experience and provide a sounding board for questions the intern may have. Furthermore, regular one-on-one meetings should be scheduled between those working with interns and the interns to provide guidance, educational opportunities, and feedback.

Finally, as with any workplace relationship, it is prudent to consider how to reduce legal risks. If the interns are unpaid, create a document for the intern to sign that sets forth the nature of the program and states that there is no expectation of compensation or a job offer.

If it is unclear whether the program would meet the DOL’s standards for an unpaid internship, pay the interns at least the minimum wage and overtime if they work the requisite hours under federal and/or state law.

The company also should consider what policies and procedures apply to interns and provide training on those policies.

For instance, the company’s anti-harassment policy should extend to anyone who may come into the workplace or otherwise engage with the company’s employees. Likewise, the company should train interns on its IT security policies and any rules for the use of the company’s electronic systems.

Interns also should be trained on the importance of maintaining confidentiality of the company’s trade secrets and proprietary information.

Companies should not be afraid to create internships. The key is engaging in a deliberative planning process before taking on interns. If done properly, internships should be a win-win for companies and interns. BW

Debra S. Friedman, a member of Cozen O’Connor, counsels businesses on employment law compliance and defends them in discrimination cases and other workplace matters. Friedman may be reached at dfriedman@cozen.com.