Advice for Employers and Recruiters
Can you really hire unpaid interns, with new rules issued by Dept of Labor?
Since 2010, employers have relied on a six-part test, issued by the U.S. Department of Labor, to determine whether their interns could be classified as unpaid interns or whether they should be actually classified as paid employees. In January 2018, the DOL issued changes to that test.
We spoke with five experts in employment law, talent acquisition and HR to discuss what the new rules mean and what employers can, or should, do now. Our panelists were Heather Bussing, California employment lawyer and contributor to HRExaminer.com; Ben Gotkin, Executive Director of the Association of Talent Acquisition Professionals, or ATAP; Steven Rothberg President and Founder of College Recruiter; Dr. Robert Shindell, President and CEO of Intern Bridge; and Alexandra Levit is a Talent Consultant, Workforce Expert, Author, and Chair of DeVry University’s Career Advisory Board.
Watch the full panel discussion at www2.collegerecruiter.
What are the rules regarding paying interns?
Heather Bussing, California employment attorney, reminds employers that the fundamental question underlying the test is the same as it’s always been: Does the internship benefit the intern or the employer? There used to be very specific yes or no questions that everyone understood to determine whether the internship was more about learning or working. The factors to determine truthfully haven’t changed either, says Bussing. But before, in order to determine that you could hire unpaid interns, you had to meet all of those [six] factors, and they had to be a ‘yes’ answer that said, ‘I’m doing this for the intern’s benefit, not the employer’s.” Now, the courts have said they are going to take a more balanced view, and ask “who gets the most benefit?” Even if some of the internship benefits the employer, says Bussing, the organization is not required to pay him or her as long as most of the benefit is to the intern.
The factors that the DOL issued to help employer determine the “primary beneficiary” of the internship include:
- the extent to which the intern and the employer clearly understand that there is no expectation of compensation;
- 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 an educational institution;
- the extent to which the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit;
- the extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic calendar;
- the extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning;
- 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; and
- 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.
The “new guidelines really don’t help at all.” That’s what Ben Gotkin, Executive Director of Association of Talent Acquisition Professionals (ATAP), thinks. In his experience, internship programs are likely to benefit both interns and employers equally. When you take into account employers with locations nationwide (where state laws vary), Gotkin thinks that despite the test appearing more employer-friendly, it doesn’t “make it easier for employers at all.”
Dr. Robert Shindell, President and CEO of Intern Bridge, agreed that this is about “as clear as mud”. The factors listed above, all beginning with “the extent to which…”, leaves too much up for interpretation. For that reason, among others, Shindell hopes this isn’t a sign that more regulations are to come.
Bussing says there might be one clear message out of this. “If you are having people do your grunt work, that’s paid. That’s not educational.”
Recruitment perspective: Employers still need to fill their pipeline
Considering tight competition in many industries, Gotkin points out that few employers will want to be the first in their market to stop paying interns. It would put them at such a disadvantage to compete for entry-level talent. That talent will simply choose to intern with an organization that pays them. In addition, Gotkin references research that showed that paid interns were more likely to receive a job offer than those who were unpaid. “If part of your goal is to recruit them”, that is, convert them to FTE, then not paying interns puts you at a serious disadvantage.
According to research done by the National Internship and Co-op Study, 87% of paid interns would accept an offer from their employer. Compare that to only 12.5% of unpaid interns who would accept an offer. “It has less to do with the pay, and more to do with the time, energy and the focus that the employer puts into structuring the experience for the internship,” says Dr. Shindell. He sees a changing “mentality” among employers. For a long time, internship programs were something “we did over the summer” and now, internships are an integral part of an employer’s talent acquisition strategy. Especially because TA leaders will be responsible for presenting the ROI of their programs, those who have paid interns will be more invested in a positive outcome.
The internship experience has also become key. Twenty years ago, says Dr. Shindell, not paying interns was a more viable strategy, but with students sharing their experience now all over social media, providing a good experience is necessary.
Gotkin has seen one industry rise above the rest. Employers of professional services and public accounting, he says, has had some of the “best internships around.” For years, he’s seen CEOs and top leadership deeply involved with these programs. Those internship programs, he says, are absolutely key to the success of their full-time hiring. “They’ve had it right for years,” and should be a model to employers in other industries.
Other legal considerations of hiring unpaid interns
Under state workers compensation protections, it may well be found that your (unpaid) interns are considered employees, if the “public policy is so strong to protect people who are injured on the job,” says Bussing. The changes issued by DOL would not be able to control that, she says.
So what is the risk when your intern feel that he or she should have been paid? They can make an administrative claim to the state Wage and Hour board. If the courts side with the intern, the penalty for not paying him or her is to pay minimum wage, plus any overtime due, plus any state law penalties. Depending on the state, interns may also potentially recover attorney fees.
Steven Rothberg, President and Founder of College Recruiter, warns employers about what he calls the inevitable “rogue hiring managers.” If you decide to bring interns on payroll, they will have at least some HR oversight. Without that, he says it would be too easy for hiring managers to bring in anyone they find, say their niece, to help them out with a few tasks. This, says Rothberg, is just asking for legal trouble.
Differences among industries and employer type
In some industries, such as entertainment, there will always be such a full pipeline of people who want to work, “whether you pay or not,” says talent consultant and workforce expert Alexandra Levit. This change “is probably not going to make a difference.”
The employers who will likely take advantage of this change are those who don’t really worry about competition or who always “have more people wanting to work for them than they know what to do with.”
Not surprisingly, Levit points out, we’ve seen the most high-profile legal cases in the entertainment industry (one example is the Fox Searchlight case, where interns sued the studio, who they felt violated the Fair Labor Standards Act).
Another type of employer likely to take advantage of this change is start-ups, says Rothberg. He says start-ups “very often skirt the law, or just completely disregard it.” At least in the tech industry, one way interns have beat their competition is to offer to work for free. Unfortunately, Rothberg anticipates some employers “preying on candidates” even more so with this change. He also anticipates other employers capitalizing on international students, encouraging them to work for free with the hope that upon graduation, they will get a job.
However, even start-ups, says Gotkin, who choose not to pay interns, will get “the has-beens, or the C and D players. The A and B players are going to work for Google and Facebook.”
The employers unlikely to want to change are those in STEM. Dr. Shindell reminds us that “you’re never going to find an unpaid civil engineer. If one engineering firm suddenly stops paying their interns, all the other firms are going to say ‘you’re no longer part of the equation and we don’t have to worry about students going to you.”
About the panelists
Heather Bussing is a California employment attorney who has practiced employment and business law for over 30 years. She also writes on employment and technology issues at HRExaminer.com.
Ben Gotkin is the executive director of the Association of Talent Acquisition Professionals, or ATAP. Ben has over 24 years of tactical and strategic leadership experience, including at organizations such as Recruiting Toolbox, Marriott International and several others.
Alexandra Levit is a Talent Consultant, Workforce Expert, Author, and Chair of DeVry University’s Career Advisory Board. Her goal is to prepare organizations and their employees for meaningful careers in the future workplace.
Dr. Robert Shindell is the President and CEO of Intern Bridge, an experiential education research and consulting firm. He has spent 20 years in the career services and hiring space, specializing among other areas, in strategic planning, leadership development, recruitment and retention.
Steven Rothberg is President and Founder of College Recruiter. He describes himself as a fully recovered lawyer, and 27 years after founding what became College Recruiter, he serves as its visionary, helping to lead company strategy and business development efforts.
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