Using (or Abusing) an Unpaid Intern

Dear Anita,

I run a small business on a shoestring. We are starting to get really busy but I still can’t afford to hire someone else. How can I go about getting an unpaid intern?

Interncarrying stacks of takeout coffeesDear “Budget Boss,”

College interns seem to be a dime a dozen in summer. In 2015, 63% of college grads with a bachelor’s degree had participated in internships, according to the National Association of Colleges and Employers. Of those, about 61% were paid, and 39% unpaid. How can employers get away with not paying minimum wage? Many unpaid internships may be walking the line of legality. Basically, if an intern does any work that is useful to the employer, the internship may not meet the exception in the Fair Labor Standards Act.

It’s easier for non-profits to utilize unpaid internships; they can simply classify the intern as a volunteer. But in the for-profit private sector, you must meet the employment exclusion or it is assumed the intern is, according to the FLSA, “suffered or permitted to work” for compensation.

Here are the six criteria from the Department of Labor to exempt an unpaid internship from being an employment agreement:

  1. The internship, even though it includes actual operation of the facilities of the employer, is similar to training which would be given in an educational environment;
  2. The internship experience is for the benefit of the intern;
  3. The intern does not displace regular employees, but works under close supervision of existing staff;
  4. The employer that provides the training derives no immediate advantage from the activities of the intern; and on occasion its operations may actually be impeded;
  5. The intern is not necessarily entitled to a job at the conclusion of the internship; and
  6. The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

Unless you work closely with your local college or university to make sure the internship meets the educational requirement, chances are, you’ll have to pay your intern minimum wage. If you have fluctuating needs for additional help, consider hiring flexible personnel from a staffing company for the months, weeks, or even days that you need help.

Readers: How have you benefitted from an internship – paid or unpaid?

Do you have a job-related question? Ask Anita.

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Does the New Overtime Rule Affect Me?

I’m getting questions from both employers and employees after the recent announcement confirming the final Department of Labor overtime rule.

Anita, I have a small business with only 15 employees. Does this new overtime rule I’ve been hearing about affect me?

Hey Anita, How do I know if my company will start paying me overtime when the new law goes into effect?

Putting in overtimeDear “Fork it Over,”

In May, the Labor Department finalized an update to the overtime rule in the Federal Labor Standards Act (FLSA). The FSLA applies to any private, non-profit, or governmental agency doing $500,000 in business annually. Note that this update only affects “exempt” salaried employees, not hourly non-exempt workers who are already entitled to time-and-a-half overtime pay when working over 40 hours in a work week.

So who are these “exempt” employees? According to the FLSA, salaried workers who are employed as executive, administrative, professional, outside sales, or computer employees who meet the “duties test” are considered exempt from Sections 13(a)(1) and (17). And just throwing “Manager” into your title is not enough; it’s your actual job duties that count.

Starting December 1, 2016, the new FLSA overtime ruling more than doubles the overtime eligibility threshold for salaried employees from $455 salary per week ($23,660 yearly) to $913 weekly ($47,476 annually). This threshold will be updated every three years to help keep up with the cost of living.

As many as 4 million more workers will be eligible for overtime pay. But will that really mean a bigger paycheck for you come December? If you fall between the $455-$913 weekly gross amount, your employer may reclassify you as non-exempt. If that’s the case, you’d see an increase in your check if and when you put in more than 40 hours in a work week.

Employers may start monitoring hours more closely and not let exempt employees go over an 8-hour day to keep their budgets in check. In that case, you may won’t see an increase in your paycheck, but you may get bonus family time!

Working late in officeIf you are just under the new $47,476 annual salary cap, your employer may decide to raise your base pay just enough to get you over the threshold and avoid having to pay you overtime. You may get a slightly larger paycheck, but depending on your actual overtime hours, a small raise may be less costly to your employer than overtime pay over the course of a year.

Some employers focusing solely on the bottom line may even lower base pay! While not illegal (if the hourly rate is still at least the federal and state minimum wage), it certainly won’t bode well for worker morale.

Employers have months to figure out their strategy for compliance with the new overtime standards. Economists and financial analysts disagree whether this will be good of bad for the American economy. Since the last salary threshold was set in 1975 – when gas was 57 cents a gallon! – I think the new overtime rule is long overdue.

“Exempt” Readers: Do you have any indication from your employer how the new FLSA overtime rule will affect you?
Business Owners: How do you plan to comply with the new overtime rule?

Do you have a job-related question? Ask Anita.

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Anita Clew's blog posts are intended for general guidance and should never be taken as legal advice. In all instances where harassment, inequity, or unfair treatment is believed to be present, please consult your HR Department or legal representation.
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