Hiring Interns for Your Small Business: Legal Restrictions and Best Practices

LAST REVIEWED Sep 18 2019 10 MIN READ

By Cyndia Zwahlen

A great internship program should be a win-win situation: business owners are looking for enthusiastic, skilled help to grow their enterprises, and students are looking to gain hands-on work experience and an opportunity to learn professional skills. Hiring an intern isn’t complicated, but it does take planning to make sure you’re creating a productive working relationship. The most intimidating part might be the strict labor laws around the hiring and management of interns, so we’ll walk you through exactly what you need to prepare for in advance!

Intern vs. employee

Ask yourself whether a high school or college intern is truly the best fit for your needs — depending on the level of experience, level of management required, budget for pay, and scope of the work, an intern might be a great fit, or you may want to opt for a more experienced employee or freelancer/contractor.

Paid vs. unpaid interns

Once you do decide that you need an intern, your biggest decision will be whether or not the internship will be a paid position, so we’ll delve into the details of this. The intern’s job description will depend on that decision because labor law restricts what an unpaid intern can do. Free help is tempting, right? Who couldn’t use an extra person cheerfully filling in the skill gaps at their small business for no pay? Small businesses are often especially hungry to find savvy young people to run their social media. Here’s one example from a recent Craigslist ad for an unpaid internship: A high tech company is looking for an eager intern to help boost the number of social media followers and interactions. Here’s a much broader job description from another recent ad for an unpaid internship: Develop packaging ideas. Determine specific markets. Develop prototype in package. Assist in Branding. Develop roll-out strategy. Develop social network strategy. Help develop sales strategy. Unpaid at commencement, BONUS paid out when product hits the market!! And this one, also for an unpaid internship, where the “essential duties” of the full-time job include: Manage overall production calendars, creative timelines/due dates and facilitate all elements throughout the creative process … finding talent on line, negotiating freelance rates and timelines … The second and third job description are a bit problematic — since an unpaid internship is considered under labor laws to be a trainee position, an intern typically shouldn’t be expected to hit the ground running at that level. A “trainee” wouldn’t reasonably be able to develop an entire sales strategy or manage, recruit, and negotiate. Unpaid internships are legal, but labor law still applies to this type of work, and the U.S. Labor Department states that, “Internships in the “for-profit” private sector will most often be viewed as employment, unless the test described below relating to trainees is met”. Here is the federal “Test for Unpaid Interns” that your internship must pass: The following six criteria must be applied when making this determination:

  • 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;

  • The internship experience is for the benefit of the intern;

  • The intern does not displace regular employees, but works under close supervision of existing staff;

  • 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;

  • The intern is not necessarily entitled to a job at the conclusion of the internship; and

  • The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

  New York state has an 11-part test that builds on the federal guidelines to determine if an unpaid internship is legal. California, which used to have a longer list of criteria, now follows the federal test. Make sure to check whether your state has any local requirements as well! If you do not meet these requirements, you will have to pay your “intern”, who, for legal purposes, is essentially apart-time employee. That means that as a legally designated employee, they will be covered by minimum wage and overtime laws. If, based on all this, you’ve decided that you need a “paid intern”, here is a guide that will help walk you through the financial and tax considerations of hiring them as employees. If, based on all this, you’ve decided that you can create a legal unpaid internship based on federal and state requirements, then you can get started with your job description and hiring process.

The internship job description

You’ll need to decide what you want the intern to do, how the intern’s success will be measured, how long the internship will last and who will supervise the intern. The supervision component is especially important for unpaid internships, as the training and education component is legally required. Get feedback from your team as you plan this out and then put the final version of the job description and expectation in writing.

Managing an intern

All of the best practices for being a good manager to your regular employees still applies to managing your first intern(s). Have a clear schedule for an intern’s first day, including who will be the intern’s supervisor. If the supervisor is not you, the business owner, be sure you check in with the intern during and at the end of the first day. That gives you and the intern a chance to further communicate expectations and progress. As we’ve emphasized already, the main difference will be the training and education component — you should be functioning under the idea that for unpaid interns, you’re trading work for professional training instead of pay. Expose interns to all aspects of your industry, even if their primary training or duties will be in one area of your particular business. Have a list of colleagues you want them to meet. And share information about industry or professional groups they can become student members of, if appropriate. Set up performance reviews throughout the internship and use those meetings as additional training and teaching opportunities.

After the internship

Once the internship is over, follow the relevant post-job steps you would take for any of your regular employees. Those could include an exit interview with the intern, debriefing meetings with the intern’s supervisor and writing a formal letter of recommendation for the intern. Be sure to ask for feedback on what they did or didn’t enjoy or learn from the internship so that you can improve your processes. Were you happy with the outcome of your intern’s work for you?. If that’s the case, that’s great news — be sure to keep in touch! A great former intern can be a future employee after they graduate, a recurring source of help that can pitch in over winter or summer breaks, or a source of referrals for like-minded students from their university or high school if you want to continue or grow your internship program. Image credit: Patrick Tomasso

Cyndia Zwahlen, a former small-business columnist for the Los Angeles Times, is a freelance business writer and editor for media, academic and business clients. She founded the Small Biz Mix blog.

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