What are your thoughts of providing a free school Intern (that worked for 3 months) with a non-payroll $1K thank you (good will) bonus for the help she has provided? 

 

My impression is that she should stay unpaid and not risk the view that we are compensating her for services, and therefore being viewed as NX.  If we are to pay, then we should capture all hours worked and process the amount via payroll or provide a 1099.  Thanks!

I think the DOL would find it difficult to accept that the money your company has paid to someone who has performed labor for your company is not compensation.  A lot of what's in FLSA is designed to prevent employers from using monopsonistic powers to get employees to "agree" to less than what they are guaranteed under the act.  That's why, for instance, you can't sign away your overtime rights in an employer-employee agreement.  This could be taken to be a scheme to skirt the overtime and minimum wage provisions of the FLSA.

I agree with you.  It helps to hear it from someone else.  Here is what I found:

 

Payments should not be requested for any volunteering “free” Interns.  If payments are to be made, then they need to follow standard new hire payroll practices; just the same as any other non-exempt employee to comply with FLSA requirements.  Hours should be recorded and payments must be paid = or > minimum wage.  Appropriate payroll deductions and record of time is required.

 

The DOL does permit companies to utilize Interns/Trainees as non-paid if they follow the below criteria.  The DOL would not view these individuals as “employees,” therefore excluding them from FLSA coverage (neither Exempt nor NX).  According to the DOL, trainees are not considered employees if ALL SIX of the following are true:

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.

6.  The employer and the trainees understand that the trainees are not entitled to wages for the time spent in training.

 

“Wage and Hour opinion letters have set forth certain conditions under which summer interns (typically students) are considered trainees.  Generally, students are not considered employees when they are involved in education or training programs that are designed to provide students with professional experience in the furtherance of their educational and training and are academically oriented for their benefit and the principle benefit is to the student, not the employer.”

                       

Note: From “Understanding the Federal Wage & Hour Laws,” by Seyfarth Shaw, 2005

 

 

Also, aside from DOL considerations, the school may prohibit student interns from accepting such bonuses. Did anyone check?

If the intern has provided help, then she may not fit the DOL definition of "intern".  I would tread very carefully here.

I have to agree with the others. It is a very very fine line.  I would not give a bonus/cash directly to her. 

The intern definition is very very limited.  I agree with LadyAnn that something as innocent and simple as "providing help"  could cross that fine line.

Instead you might look into doing a donation to whatever program/school she came from.

I appreciate the information provided on unpaid interns. I am dealing with this for the first time and would like advice or a sample of any waiver some of you may have used to protect your company. I contacted the school, which is a private school, and they have never provided any documentation.  I will meet with the intern and talk about the privacy issues, etc. and have him sign a policy acknowledgment. Can you provide any other pointers? 

I can send you our intership contract if you give me your email address, but in the meantime, here are some guidelines...

 

Internship Guidelines

 

 

General Information

 

·         Advertisement and selection for internship positions must follow equal employment/nondiscrimination laws.   Positions must be advertised and interviews should occur.

 

·         A true internship involves a contract that is negotiated between the school, student and employer that is in place prior to the start of the internship period.  An internship may be paid or unpaid.  An arrangement that does not fall into this category is not a true internship and the employee must be paid at least minimum wage to meet workers’ compensation coverage and wage and hour law requirements.

 

·         To  insure compliance with equal opportunity, minimum wage and workers’ compensation requirements, internships are coordinated through the Human Resources Department.

 

Unpaid Internships

 

The key to maintaining a relationship with interns in which minimum wage/workers’ compensation liability does not arise is to stick to the purpose of the internship:  Keeping the job related to the school work for which the student/intern is receiving course credits.

 

To insure that the internship is validated we must:

 

·         Get official documentation from the school prior to the start of the intern period.  Understand the kinds of course work the intern is taking and tailor assignments so they directly relate to their studies.  If the intern’s work has no relation whatsoever to a course of study, it is more likely that an employment relationship covered by federal or state minimum wage laws will be found to exist.

 

·         Confirm with the school that the intern will receive course credits toward completion of a degree or certificate if the internship is successfully completed.  In this regard, obtain a letter from the school indicating that the work involved in the internship has been approved as relevant to the intern’s course work.

 

·         The intern should be required by the school to prepare a report on the work experience and submit it to a faculty member.  This reaffirms the educational purpose of the work.  Ask for a copy of this report for your own records with a copy to Human Resources.  This is important documentation that later may be needed as evidence of the educational usefulness of the work, if this is ever called into question.

 

 

 

 

·         Clearly identify the learning objectives before the start of the internship period.  The goal of the internship should be to learn and not to make money for the intern or the employer.  We should be teaching the intern a skill or providing knowledge about our business or industry....any other motivation we may have is cause for an employment relationship that we are required by law to provide wages.

 

·         The internship relationship should have a defined beginning and end. 

 

·         The internship may require supervisory critiques.  The completion of brief questionnaires furnished by the school.

 

·         As a general rule, interns should spend no more than 50% of their time performing work ordinarily done by regular employees.  Interns who in effect duplicate work done by the regular work force may be held to be employees.  Do not fit interns into job descriptions used for employees.  Their assignment should be outside the scope of the written description.

 

·         Interns should not be guaranteed a job upon completion of the internship or graduation from school as this tends to strengthen an intern’s claim to employee status.

 

Following the above criteria will insure that the internship relationship is covered under our workers’ compensation insurance policy and that wage and hour laws are not violated.

 

 

Although this is from the State of Texas website, it is a good discussion on interns/"trainees" and FLSA:http://www.twc.state.tx.us/news/efte/advanced_flsa_issues.html (you have to page down to get to the intern part)

I would be most concerned with #4: employer deriving immediate advantage from the trainee....

Personally I would have an attorney draw up the agreement because like many of us have said this is a very fine line where all 6 criteria must be met. If you fail one, then you crossed the line.

efeldman:

·         Confirm with the school that the intern will receive course credits toward completion of a degree or certificate if the internship is successfully completed.  In this regard, obtain a letter from the school indicating that the work involved in the internship has been approved as relevant to the intern’s course work.

 

·         The intern should be required by the school to prepare a report on the work experience and submit it to a faculty member.  This reaffirms the educational purpose of the work.  Ask for a copy of this report for your own records with a copy to Human Resources.  This is important documentation that later may be needed as evidence of the educational usefulness of the work, if this is ever called into question.

 

These are two of the most critical aspects.

 

Show that the intern is being "compensated" by receiving academic credit in relationship to the work.

 

One of the ways that you can demonstrate that the work was for academic purposes is to relate it to an academic deliverable.