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Summer Interns May Increase Risk of Lawsuits; Chubb Offers Employers Tips

WARREN, NJ, April 9, 2014—Hiring someone for a paid or unpaid internship may seem like a great solution for businesses needing extra talent during vacation season. But, if not handled appropriately, it can be riddled with problems and risks.

“Just because you have an extra cubicle or computer doesn't mean you’re ready to hire an intern,” said Roy Tyson, worldwide deputy employment practices and fiduciary product manager for the Chubb Group of Insurance Companies. “Before you bring an intern on board, make sure your company has a formal internship plan and that it complies with federal and state regulations.”

Unpaid internships offered by for-profit companies are subject to the U.S. Department of Labor’s Fair Labor Standards Act (FLSA), which establishes minimum wage and overtime standards. However, for-profit company internship programs that offer an educational experience for the benefit of the intern may be exempt from FSLA regulations under a “trainee” exception. Unpaid internships offered by non-profits and government agencies are also exempt from FLSA regulations.  

“While businesses may believe they have met all the necessary guidelines regarding unpaid programs, they may find that more often than not, they haven't,” said Tyson. “When in doubt, it’s always a good idea to check with the Department of Labor or your human resources or general counsel departments.”

In addition to complying with FLSA, businesses should consider the following when establishing an internship program:

  • Paid or unpaid? Recent lawsuits by unpaid interns are changing the landscape for organizations with internship programs. While these cases dealt with compensation issues, to help mitigate the potential for litigation, companies also should consider how to treat interns with regard to anti-discrimination and anti-retaliation policies, handling grievances, and any other protections that are offered to other employees.
  • Work hours? Beware of state wage and hour laws which may vary in terms of what is considered proper compensation or hours worked.
  • Program information? Interns should receive a detailed description of the internship, the training experience and a statement that the program complies with labor laws.

Chubb provides employment practices liability (EPL) insurance and services to help companies mitigate employment practices risks. Chubb's EPL customers have access to ChubbWorksSM, an online portal that provides loss prevention training and analytical tools; a toll-free hotline to a nationally-known law firm; and Loss Prevention Consultant Services, an online directory of more than 120 top law firms, human resources consulting firms and labor economist statisticians who can help companies address specific employment issues. Chubb customers can hire these firms at preferred rates, with Chubb potentially reimbursing a portion of the cost of services related to the insured’s employment practices coverage.

About Chubb

Since 1882, members of the Chubb Group of Insurance Companies have provided property and casualty insurance products to customers around the globe. These products are offered through a worldwide network of independent agents and brokers. The Chubb Group of Insurance Companies is known for financial strength, underwriting and loss-control expertise, tailoring products for the needs of high-net-worth individuals and commercial customers in niche markets and select industry segments, and outstanding claim service.

The Chubb Group of Insurance Companies is the marketing term used to describe several separately incorporated insurance companies under the common ownership of The Chubb Corporation. The Chubb Corporation is listed on the New York Stock Exchange (NYSE: CB) and, together with its subsidiaries, employs approximately 10,000 people throughout North America, Europe, Latin America, Asia and Australia. For more information regarding The Chubb Corporation, including a listing of the insurers in the Chubb Group of Insurance Companies, visit www.chubb.com.