Summer Interns: The Three Mistakes
Michael G. Trachtman
Powell Trachtman Logan Carrle & Lombardo, P.C.
MEA General Counsel
Summer internships can provide transforming opportunities and training for students, and low-cost help (and a future hiring pool) for employers. But there are some legal minefields that need to be navigated, and some legal risks that need to be managed.
Three issues are, far and away, the most important, and the failure to confront these three issues frequently leads employers to make three, very costly, mistakes.
Do You Have to Pay the Interns?
In 2010, the U.S. Department of Labor made it plain that employers must pay interns at least the minimum wage – and overtime – unless the employer-intern relationship meets each of the following criteria:
- The internship must be similar to training given in an educational environment;
- The internship experience must be primarily for the benefit of the intern;
- The intern must not displace or supplant regular employees, or perform duties traditionally rendered by regular employees;
- The employer must derive no immediate advantage from the intern’s activities (ideally, the intern would impede the employer’s operations);
- The intern should not necessarily be entitled to a job at the conclusion of the internship;
- The employer and the intern must agree, preferably in a signed writing, that the intern is not entitled to receive remuneration for his/her work.
In other words, if you hire a student for a summer job – as opposed to allowing the student to use your company as a pure learning experience – you will have to pay at least minimum wage and overtime. It does not matter that the student asked, even begged, to be employed just for the experience, and for no pay. It does not matter that the student sought to “volunteer” his or her time. Unless these criteria are satisfied, you need to pay the student.
In recent years, there has been a rising tide of high-profile and very successful lawsuits charging employers with violating these standards, resulting in many six-figure, and some seven-figure recoveries. The resultant media attention has spawned a cottage industry of lawsuits, some of them class actions, against employers of all types and sizes that employed, but did not pay (or properly pay) their interns. Be careful.
What if the Intern is a Minor?
Virtually all states have stringent “child labor” laws that apply to minors – that is, individuals under 18 years of age. The details of the Pennsylvania, New Jersey and Delaware laws are beyond the scope of this article but, typically, they require that the minor obtain a work permit (usually from the minor’s school district); that the parent complete a permission form; that certain work schedule and work duty limits be respected, often dependent on the age of the minor; and that certain workplace postings be maintained.
State websites usually provide excellent summaries of the requirements and links to forms. For example: http://www.portal.state.pa.us/portal/server.pt/community/child_labor_law/7508.
What About Confidentiality, Non-Use, and Intellectual Property Protections?
Virtually all employers require (or should require) employees to sign agreements that prohibit the use and disclosure of the employers’ confidential information – for instance, customer lists, computer code, pricing and margin information, business plans, production methods, and so on. In certain circumstances, it can also be important to clarify who owns the intellectual property rights to any work product an employee creates that arises from work duties or information obtained through the employer, either during or outside of work hours.
Often, however, employers ignore these requirements when it comes to interns, and that can be a mistake. I have confronted more than one situation in which a student employed by a company during the summer later took a job with a competitor of his summer employer, and the student had a wealth of information on which the competitor was able to feast.
The solution seems simple: if you want to protect yourself, have the intern sign confidentiality, non-use, intellectual property and other agreements tailored to his or her situation. But here’s the complication … suppose the intern is a minor? Will the agreement be binding?
In most states, and in most circumstances, a contract with a minor is “voidable” – that is, the minor can opt out within a reasonable time after the minor reaches 18. At the very least, you will need to recognize that a contract with a minor is risky business, and you should involve the minor’s parent or guardian in the process.
Let us know if we can help.
Michael G. Trachtman is MEA’s general counsel and the President of Powell Trachtman Logan Carrle & Lombardo P.C., a 30+ attorney King of Prussia-based law firm that has represented businesses and business people for over twenty-five years. He can be contacted at email@example.com . See www.powelltrachtman.com for more information.