Internal Affairs

Greater benefit

While the Labor Department closely adheres to its six criteria, courts tend to look at the spirit of the internship program as a whole. Is it basically an educational endeavor with side benefits for the business, or more like a job that trainees learn? Who benefits most from the arrangement? For instance, a fire department in Colorado required all job applicants who had passed a battery of tests to enroll in its firefighting academy for 10 unpaid weeks of training. Four firefighters later appealed to the Labor Department, claiming they should have been paid minimum wage for those 10 weeks.

The Labor Department sued the fire department, claiming that the academy didn't count as an internship because the trainees fully expected to be hired at the end of the training period. The U.S. District Court for the District of Colorado dismissed the case. The 10th Circuit U.S. Court of Appeals upheld the dismissal decision, noting that on the whole, the academy was more like schooling than like a job. The program was similar to vocational firefighting courses, and the skills taught were transferable to other fire departments. The trainees' expectations of jobs at the end of the program weren't enough to entitle them to wages.

Although few small businesses would run a training academy, the basic question is the same if you're bringing in a few interns: Is this an educational experience primarily for the benefit of the interns or a cheap way to get your extra work done? "If all you're doing is having them do file clerk work, that's not an internship," O'Connor says. Employers often argue that the educational aspect is the students' exposure to the work environment, but if that's all they're getting, it's not educational enough.

When an internship is set up through a local college or university, students can often obtain academic credit for their effort. The fact that they're receiving credit, though, doesn't mean they're not also entitled to minimum wage if your business derives immediate benefit from their labor. Check with the administrator of internships at the college to make sure your program meets their criteria and doesn't break any laws. O'Connor warns against being a "nice guy," however, and volunteering a small stipend to interns because it looks suspiciously like you're offering a below-minimum wage. Offer benefits or a gift if you like, he says, but avoid payments of money unless they're at least minimum wage.

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This article was originally published in the November 1997 print edition of Entrepreneur with the headline: Internal Affairs.

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