In early January, the U.S. Department of Labor (DOL) put out a fact sheet that details how the agency is aligning its policy on intern employment status with new rulings by several U.S. appellate courts. In the past, it would have been much more difficult to bring interns on board without needing to pay them minimum wage and overtime. Employers had to pass several tests to demonstrate that interns were not subject to Fair Labor Standards Act (FLSA) protections.

The fact sheet details the new standard, which relies on a new “primary beneficiary” test grounded in “economic reality,” per the DOL. Should an unpaid intern (or one who was paid less than that dictated by the FLSA) claim that he or she should be covered by the FLSA, the Labor Department’s Wage and Hour Division would consider and weight the following seven factors.

The extent to which:

1. The intern and the employer both understand clearly that there is no expectation of compensation. Any promise of compensation, stated or implied, suggests that the intern is an employee — and vice versa.
2. The internship gives training like that would be provided in an educational environment, including the clinical and other hands-on training provided by educational institutions.
3. The internship is bound to the intern’s formal education program by integrated coursework or the receipt of academic credit.
4. The internship accommodates the intern’s academic commitments by matching the academic calendar.
5. The internship’s length is limited to the period in which the internship provides the intern with beneficial learning.
6. The intern’s work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern.
7. The intern and the employer understand that the internship is done without being entitled to a paid job after the internship ends.

Unique Circumstances

Also, in regards to the above test, “no single factor is determinative,” the DOL explains. Rather, determinations will be made based on “the unique circumstances of each case.”

Obviously, under these guidelines, an internship still must be a two-way street. And practically speaking, an internship program—particularly one that is unpaid—needs to appeal to potential interns based on what they’ll learn during it. Otherwise, the field will be sparse.

Which raises the question: Why have an internship program at all? How do internships benefit your organization if it’s not just a source of free or low-cost labor? According to the Society for Human Resource Management (SHRM), the benefits include:

• Being able to tap into a pool of potential future full-time employees about whom you’ll know much more than can be learned from resumes or job applications,
• Build your brand recognition as an employer, including acknowledgment of being an employer that helps launch young peoples careers,
• The opportunity to evaluate your human resource functions in regards to where there might be gaps in training support, both for interns and regular employees,
• Advance your workforce diversity initiatives, and
• Increase the loyalty of employees whose children and relatives become interns.

Not Just for the Young

Interns can also include working-age people who are looking for a career change, not just students. There may also be retirees and pre-retirees who want to do an internship in stay involved in the working world, learn new skills, and interact with other.

SHRM recommends that internship programs be created and judged with the rigor as other important organizational initiatives. “SMART goals,” those that are specific, measurable, attainable, relevant, and time-bound, should be established. SMART goals could include building or enhancing a reputation as a “best local place to work.” Another goal, suggested by SHRM, might be “obtaining candid feedback about organizational problems and overlooked opportunities and talents.”

Caveats

Finally, a couple of internship caveats. First, make sure not to bump up against any child labor laws. Federal requirements are relatively minimal. However, state child labor laws vary widely and must be reviewed before launching an internship program.

The second caveat is that interns, especially when they’re not paid, may believe they are exempt from workplace policies that apply to regular employees (such as an existing dress code). In most cases, interns should be held to the same standards that you expect from employees. But spell out the standards from the beginning and make sure they are reasonable for the young and unpaid.

The DOL’s new internship flexibility doesn’t give you carte blanche to ignore the needs and expectations of interns in regards to the benefits they’ll gain from the program. But from an employer perspective, the value proposition of an intern program may be stronger than ever. You can improve your chances of avoiding legal challenges by consulting a qualified attorney before starting (or restarting) your internship program.