Summer tempters: summer interns, events and employer sponsored sports teams - good business or business risk?

Unpaid summer interns

Recent high profile class action lawsuits and a Labor Department crackdown on internships have put the spotlight on hiring interns. While internships have long been an accepted way to gain "real world" experience, the soaring number of internships during the recession caught the attention of regulators. In April 2010, the Labor Department's Wage and Hour Division published a fact sheet notifying employers that "internships in the 'for-profit' private sector will most often be viewed as employment" unless they meet the following six-factors:

1. The training, though it may include actual operation of the employer's facilities, is similar to training that would be given in an educational environment.
2. The training is for the benefit of the intern.
3. The intern does not displace regular employees, but works under close supervision of existing staff.
4. 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.
5. The intern is not necessarily entitled to a job at the conclusion of the internship.
6. The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

Some states, including California, have additional criteria. Moreover, if the intern does not meet the criteria of a "trainer/learner," an intern at any for-profit company would not fit the definition of volunteer. The DOL regulations define "volunteer" as an individual who provides services to a public agency for civic, charitable, or humanitarian reasons without promise or expectation of compensation for services rendered.

While the focus of the lawsuits is on the right to be paid, the suits also allege that by misclassifying workers as interns, employers denied them "the benefits that the law affords to employees, including unemployment, Workers' Compensation insurance, Social Security contributions..." Whether or not an unpaid intern is protected under Worker's Comp depends on state laws and specific circumstances, with many states not addressing the issue in their statute, leaving the issue to the courts. Cases in New York, Michigan and Colorado have held that interns are eligible for benefits, whereas a Florida Court of Appeals ruled against the intern.

Even if an unpaid intern is not covered by Workers' Comp, an intern who is injured could sue the employer for medical costs and damages. It's important to recognize that even if the job is short-term, a good risk management practice is to advise the intern of the inherent risks in working in the workplace, train in safety procedures, and provide adequate supervision.

Employer-sponsored sports teams or events

There are many advantages to sponsoring an employee sports team or event, such as camaraderie, team building, exercise and just plain fun. However, what happens if an employee strains his back while pitching for your softball team or is hit by a golf ball during an outing to entertain clients or a fight breaks out and a third party is injured? It's important for employers to understand the risks, including liability for a Workers' Comp claim and liability for injuries of a third party caused by an employee.

While laws vary by state, the relationship of the company to the activity plays a key role in assessing liability. Some common guiding principles include:

• If the event is truly voluntary
• Did the manager tell the employee to attend?
• Is entertaining clients part of the job description?
• Did the employer convey the expectation that all employees would attend?
• If an employer derives a direct business benefit from the activity
• If the event was on company property
• If the activity took place during normal working hours and the employee was compensated
• If the employer paid for the activity
• If employees are expected to build customer relationships by participating

Whether or not an injury during an event is while 'in the course and scope of employment' is not always clear-cut. Two recent cases illustrate this point:

In a Delaware case, Calvin Williams vs. Bank of America, the employee injured his knee in an organized 3-on-3 basketball tournament at a Boys and Girls Club, which was found to be in the course and scope of his employment. Cassandra Roberts, Partner, Young Conaway Stargatt & Taylor LLP notes that this decision, written by Hearing Officer Lydia Anderson, offers a cogent and concise overview of the law with a step-by-step analysis of how the facts of the case apply to the legal principles:

• His supervisor asked claimant several times if he was playing, raising the pressure to participate beyond the concept of a volunteer.
• The employer worked it out so the claimant could play during his normally assigned work shift with no requirement that he make up the time, a level of accommodation again bringing the claimant's involvement beyond that of a volunteer, and smacking of strong employer encouragement.
• The employer was deemed to have derived a significant benefit from this event in the form of employee camaraderie, as well as an improved community and corporate image.

In contrast, in New York the Board held that a corrections officer's injuries, sustained in a softball tournament with her department coworkers, did not arise out of and in the course of her employment. In denying benefits, the Board noted that the officer was neither required nor compensated to participate in the tournament. Employees had to practice on weekend, had to charge their accruals for time spent participating in the tournament and were required to pay an entry fee. The entry fees covered the costs of T-shirts, hats, and food that were supplied to the employees. The games were not played on the department's premises, nor did the department provide equipment or transportation to and from the games. Fliers and sign-up sheets were hung in the jails, and the trophy was displayed in the winning team's jail. While the intent of the tournament was to boost employee morale, the department offered no incentive for participation in the tournament and did not overtly encourage its employees to participate in the tournament.

Here are a few guidelines to help minimize the risks and liabilities:

• Don't hold events on company premises or on company time.
• Have employees sign waivers. Make sure employees know participation is voluntary and they're playing at their own risk. Don't require or encourage participation in anyway. Recognize, however, that waivers do not provide all-encompassing protection.
• Limit company participation in the costs of the program, such as buying equipment or uniforms, refreshments, etc. The smaller the financial commitment, the less likely the team will be viewed as an extension of work.
• Know the state law. Some states provide forms that employers can require employees to sign.
• Include company policy on athletic and social events in the employee handbook.
• Prohibit alcohol.
• Treat all injuries consistently.