Nonprofit Law Basics: Legal Issues with Internships

Our nonprofit would like to have an internship program. What legal issues should we consider?

Internships are seen as a rite of passage for many college and graduate students. Organizations, particularly nonprofits, understand how beneficial an internship program can be not only for the student, but also for the organization.

Before the summer intern season begins, your organization should consider the best way to structure your internship program to ensure that your organization is compliant with employment laws and with any potential liability issues related to interns.

Will your nonprofit offer unpaid or paid internships?

Compensation for interns can determine whether your intern should be classified as an employee or as a volunteer.

If your interns are to be unpaid, then you should be clear in your job posting that it is a volunteer position. The U.S. Department of Labor allows for unpaid internships in the public and nonprofit sector. For-profit organizations are subject to more stringent rules regarding internships, but an exception exists for individuals to volunteer their time, freely and without anticipation of compensation for religious, charitable, civic, or humanitarian purposes to non-profit organizations or state/local government agencies.If your nonprofit is going to offer compensation, then your intern may be considered an employee.

Employees are generally subject to the Fair Labor Standards Act (FLSA), which establishes minimum wage, overtime pay, recordkeeping, and youth employment standards affecting employees in the private sector and in Federal, State, and local governments. Covered nonexempt workers are entitled to a minimum wage of not less than $7.25 per hour effective July 24, 2009.

If you are paying your interns, then they need to be paid according to applicable state and federal wage laws.

What if our organization offers unpaid interns a small stipend to offset expenses related to volunteering?

The distinction between volunteer and employee can be blurred if your volunteers receive some type of payment.

The Federal government defines a volunteer as an individual who meets the following criteria:

  1. Performs hours of service for a public agency for civic, charitable, or humanitarian reasons, without promise, expectation or receipt of compensation for services rendered;
  3. Offers their services freely and without pressure or coercion, direct or implied, from an employer; and
  5. Is not otherwise employed by the same public agency to perform the same type of services as those for which the individual proposes to volunteer.

Federal law does allow volunteers that meet this definition to be paid reasonable benefits, reimbursed expenses, a nominal fee, or any combination thereof, for their service without losing their status as volunteers under FLSA.

A stipend could be considered a nominal fee if it is not a substitute for compensation and is not tied to productivity.  For example, a nonprofit that offers unpaid interns who meet the volunteer criteria stated above a weekly stipend of $25 to offset transportation expenses may not be considered an employee and could retain volunteer status.

What other liability issues concerning interns should we consider?

If your intern is considered an employee, your insurance coverage may already cover him or her. However, if your intern is considered a volunteer, check whether your workers’ compensation insurance covers volunteers or if you need additional coverage.

Interns should also know what policies apply to them, including policies related to confidentiality, use of the organization’s equipment, and expense reimbursement.

If your intern is a volunteer, it may also be prudent to have him or her sign a volunteer service agreement that includes a waiver of liability. The agreement should clearly state that the individual understands that he/she is not an employee and that he/she is volunteering their time to the organization.

Learn More

Cullinane Law Group: Ensure Compliance with Employment Laws

U.S. Department of Labor: Compliance Assistance — Fair Labor Standards Act

The Cullinane Law Group works exclusively with the nonprofit sector: new nonprofits, foundations, religious groups, and social entrepreneurs throughout the United States who seek to create positive change. Contact us today to learn how we can help your organization.

   Learn more about volunteers and employment.

   Get state-specific information about legal issues related to volunteers and employment.

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