Avoid Legal Risk When Using Unpaid Interns
Unpaid interns are a very tempting resource for boot-strappers. A quick call to almost any university’s career services office or an ad on Craigslist will yield a plethora of interested applicants. And, in today’s economic climate, those responding will probably be reasonably qualified.
The ultimate goal is to use unpaid interns to help the enterprise drive revenue so that the unpaid interns become paid employees. In the interim, using unpaid interns can open the business up to some serious legal risks.
The US Department of Labor (as well as the Departments of Labor for every state) follow very strict rules when it comes to using unpaid interns. The consequence of failing to follow these rules could be fines by governmental authorities or lawsuits by unhappy former interns.
When thinking about using unpaid interns for your business, consider the following:
- Educate: The primary idea behind unpaid internships is for interns to receive critical on-the-job education and experience. Make it a priority to educate your interns. If business is slow in a certain area, build in a case study that allows interns to explore all of the facets of the business.
- Provide a good overall experience: This could mean a lot of things. Maybe it’s a Friday night happy hour or maybe it’s some company swag. You might help your interns by opening up your network or providing experiences outside of work. Whatever you decide, boosting intern morale can be your ounce of prevention to avoid needing a pound of cure.
- Pay interns if you can: By far, the safest way to go with interns is to pay them. Even paying minimum wage will alleviate all of the potential pitfalls. If your business can afford to pay, then do it.
The legal risks involved in using unpaid interns are both technical and practical. There is no perfect answer, but structuring an intern program carefully and actually following the structure devised can mitigate the risk and bring valuable talent in the door.
Lawyer Money Stuff: Retainer Fees and Fee Agreements
Money. It’s the reason a lot of lawyers become lawyers in the first place (because they want a lot of it). We all grew up watching Perry Mason, Matlock or LA Law and thought…those guys make good money, I should do that! But how is it that lawyers get paid? And why does paying their lawyer make most clients jittery, sick and/or angry enough to wield a gun?
A Fee Agreement is a required (as in, required by most states in their code of professional conduct for attorneys) contract between an attorney and a client. The Fee Agreement, also known as an Engagement Agreement or Retainer Agreement, represents the understanding between the attorney and the client. For example, “I will defend you from that unfortunate animal cruelty and public indecency indictment from beginning to end, and you will pay me $500 per hour for every hour that I work on your case.” This would be a very basic Fee Agreement. It spells out what the lawyer will do for the client, and what he/she will charge.
A Retainer Fee is a necessary part of the Fee Agreement and payment arrangement among the client and the attorney. Often, an attorney takes on a client for a single, one-off representation. Because of this, and because of the way in which legal representation is front-loaded with costs (the attorney usually expends the most time, and thus bills the most hours, on the front-end of the engagement), the attorney usually requires a Retainer Fee.
This is an up-front deposit by the client which shows that the client is serious enough to put down a significant sum of cash, and assures the attorney that he/she will be paid at least for initial work done for the client. The attorney takes the retainer fee, and starts working. Until the attorney has expended hours working on the client’s matter, he/she is not entitled to keep the retainer (it remains the property of the client and the attorney must keep the retainer fee separate and apart from his own funds). Once the attorney has billed hours to the client, the attorney credits the retainer fee over to his own account. This is the easiest payment an attorney will ever receive (because to get the money, all the attorney has to do is make an accounting entry…way better than arguing with clients).
So there it is…how attorneys get paid…the easy way.
New Post on the Nanny Tax at Grown in My Heart
Just posted here at Grown in My Heart on the so-called “Nanny Tax” talking about the tax aspects of hiring nannies or other household workers.
Hell hath no fury like an employee scorned…
I’ve been meaning to put up a post for a while now about how badly an ex-employee can sting your business…even if you have all the standard non-solicitation and confidentiality provisions with the employee in his or her employment contract.
Prime example: Nelson Piquet, Jr., a former Formula 1 race driver. As can be seen here, here and here; Mr. Piquet and his former bosses at Renault F1 agreed last year that Nelson would crash his car deliberately in order to give an advantage during a race to his teammate. The circumstances surrounding Mr. Piquet’s (and his bosses’) acts are not that important other than for illustration…but the point is this: once Nelson was fired from the team, he got back at his former employer by telling all to the Formula 1 governing body. Chaos ensued for his bosses and his employer.
This happens all too often in small businesses…paying employees under the table…installing one licensed software program on many company computers…and other similar activities occur with the open endorsement of those in charge. Then, once a knowledgeable and disgruntled employee leaves the ranks, he or she decides to get back at his former employer by ratting it out to anyone that will listen.
The moral of the story is obvious…although most business owners play this game to some extent or another despite warnings like this.
Asset Protection if you hit your head…like Conan O’Brien
Conan O’Brien made news last week when he cracked his melon against the Tonight Show floor. Luckily, he was fine with just a minor concussion. Obviously, Conan didn’t set out to slip and fall on his head…but he did. Life happens, including undesirable events. This is why people buy insurance, and why most everyone can benefit from a comprehensive estate plan.
Whenever I talk about asset protection, most people have visions of Learjet rides to Barbados with a suitcase full of cash and exotic trust documents. But asset protection can be as simple as having a comprehensive estate plan, for instances just like Conan’s accident. How can an estate plan serve an asset protection role?
Let’s assume for a moment that after Conan hit his head, he wasn’t fine. In fact, let’s assume that he hurt himself to the extent that he became permanently impaired for the rest of his life…unable to walk, talk, eat or competently make his own decisions. This is bad enough of course, but in the days and weeks following the shock of the accident, Conan’s family and advisors would very likely need to be able to deal with his property…this could be something as complex as executing a major media business deal (perhaps the use of his likeness for a new toy doll to be marketed throughout the United States) or something as simple as selling his house.
Either way…Conan needs to sign. Problem is (at least in our example) he can’t sign…he can barely say his name. Without an estate plan in place, Conan’s wife will have to go to court and obtain a guardianship over him. This will give her the power to deal for him. In addition, she’ll need to get a “bond” in the amount of his total assets…this process can be very, very expensive, time-consuming and emotionally trying.
With a comprehensive estate plan, Conan’s wife would have the power as successor trustee of Conan’s trust and as Conan’s agent under power of attorney for property to deal with his property without the delay and cost of obtaining a guardianship. No business deals lost, no additional emotional strain. Pretty good.
