Hey Founders, Not Planning on Paying Your Interns this Summer? Proceed with Caution.

In the world of start-ups, every dollar counts. It comes as no surprise then, that before I have a chance to wipe the mustard off my face from the Memorial Day BBQ, a tidal wave of client emails hit my inbox requesting “unpaid summer intern offer letters,” as if to throw an underhand pitch to the Massachusetts employment regulators. Enter Matt Mitchell, chair of the Morse employment group. As he highlights in his latest post in the Massachusetts Employment Law Blog, despite the fact that some start-ups tend to see their summer interns as “casual” or “unregulated” employees, the employment of summer interns, particularly with respect to interns who are under age 18, is a highly regulated area of Massachusetts law.

Both the Massachusetts Attorney General and the Federal Department of Labor have taken a clear line on intern pay:  For-profit employers must compensate interns/fellows for work performed, unless the intern/fellow qualifies as a “bona fide student intern.”  A bona fide student intern is not an “employee” for purposes of wage and hour laws, and need not be compensated for work performed.

Whether a worker qualifies as a bona fide student intern depends on the following factors:

1. The extent to which the intern and the employer clearly understand that there is no expectation of compensation. Any promise of compensation, express or implied, suggests that the intern is an employee—and vice versa.

2. The extent to which the internship provides training that would be similar to that which would be given in an educational environment, including the clinical and other hands-on training provided by educational institutions.

3. The extent to which the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit.

4. The extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic calendar.

5. The extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning.

6. The extent to which the intern’s work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern.

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.

Therefore, if a start-up is intent on providing an unpaid internship/fellowship experience for an individual, it must create an academic-like program that is consistent with the above factors.  If the individual is presently a student, this might be accomplished through coordination with the school’s career services department.  If the individual is not a student, it will be more difficult, but not impossible, to accomplish. Enter Matt and the employment group at Morse who are helping our clients conceive compliant programs.

As with all matters related to Wage and Hour laws, a non-compliant summer internship program may result in significant penalties and litigation liability. So founders, please proceed with caution!