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Does Your Nonprofit Use Interns?

by Molly O'Connell

Remember Black Swan? It’s back in the news, and nonprofits should pay attention. A recent court ruling about the usage of unpaid interns on that movie’s set is drawing attention to potential legal and financial liabilities that nonprofits would be wise to carefully consider when planning and managing internships.

Below is a great summary of the issues at hand that we’ve re-printed with permission from MANP Friend and presenter, Robert Levin. In addition, here are some other resources to help your nonprofit manage your risks related to internships and classifying workers.

Interns or Employees?

Re-printed with permission from “Maine Nonprofit Law E-Bulletin, July 2103” by  Robert H. Levin – Attorney at Law

Ah yes, the sticky summer days are here, and many Maine nonprofit organizations have ramped up their internship programs. Free or very inexpensive labor from earnest young people — what could go wrong? Ideally, an internship is a symbiotic relationship in which the intern gains certain skills and personal networks in a field of his/her interest, while the nonprofit receives valuable assistance and trains new talent. However, nonprofits should be aware of possible liability exposure if they do not structure the internship carefully.

The key issue is whether an intern is really an “employee” under various federal and state employment laws. For the purposes of the federal Fair Labor Standards Act (FLSA), which governs minimum wage, overtime, and other key employment laws, internships must meet certain criteria or the intern will be deemed an employee. In 2010, the U.S. Department of Labor (DOL) issued a fact sheet setting forth six criteria in order for an intern (or “trainee”) not to be deemed an employee of a for-profit employer, as follows:

  1. the training, even though it includes actual operation of the facilities of the employer, is similar to that which would be given in a vocational school;
  2. the training is for the benefit of the trainees;
  3. the trainees do not displace regular employees, but work under close observation;
  4. the employer that provides the training derives no immediate advantage from the activities of the trainees and on occasion his operations may actually be impeded;
  5. the trainees are not necessarily entitled to a job at the completion of the training period; and
  6. the employer and the trainees understand that the trainees are not entitled to wages for the time spent in training.

Although the DOL’s fact sheet expressly states that unpaid internships by nonprofit organizations need not meet these criteria, the unstated corollary is that paid internships are subject to the criteria. Ironically, a nonprofit, in trying to support an intern by offering a stipend or other compensation, could be opening itself up to a legal challenge if the internship is not structured to benefit the intern over the organization.

A recent federal court decision in New York held that interns working on the film Black Swan were indeed employees under the FLSA. The court opinion weighed the six DOL criteria, as was appropriate in that for-profit context, and determined that none of the first four criteria were met. This decision, although it may be appealed, is causing for-profit and nonprofit employers to pay more attention to the DOL criteria.

The FLSA is not the only statute by which an intern could be subject to the same laws as an employee. The Maine Employment Practices Act, for example, has a broad definition of “employee,” although there is no case law interpreting whether an intern could fall within its scope. Furthermore, volunteers occasionally have brought age discrimination, sexual harassment, and other discrimination lawsuits against public agencies and nonprofit organizations, with varying degrees of success.

Given the potential legal exposure, the most prudent course of action by a nonprofit organization would be to either not pay its interns anything, or to pay a stipend but make sure that the internship program meets the six DOL criteria. Furthermore, for anti-discrimination purposes, nonprofits should assume that interns could claim employee status and thus should be treated fairly and legally within the scope of those laws.

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