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Interns: Paid or Unpaid?

(posted: April 4th, 2018)

Internships: Paid or Unpaid?

Are you already starting to think about bringing in interns this summer?

Internships are a great way to give young people a feel for how jobs in their chosen field work in the "real world", and can also benefit the company by potentially training some new staff. However, if your "intern" is doing work that others get paid for, you'll need to make sure you are paying the intern according to fair labor standards.

Paid or Unpaid?

The U.S. Department of Labor (DOL) has adopted the "primary beneficiary test" for determining whether interns of for-profit employers count as employees under the federal Fair Labor Standards Act (FLSA).

The FLSA requires for-profit employers to pay employees for their work. Interns and students, however, may not be "employees" under the FLSA, in which case the FLSA does not require compensation for their work.

In ruling on FLSA cases, courts have previously used the primary beneficiary test to examine the "economic reality" of the intern/employer relationship to determine which party is the "primary beneficiary of the relationship."

On January 5, 2018, the DOL announced its adoption of the primary beneficiary test for purposes of its enforcement of the FLSA.

The primary beneficiary test includes the following seven factors:

  • 1) The extent to which the intern and the employer clearly understand that there is no expectation of compensation. Any promise of compensation, express or implied, suggests that the intern is an employee, and vice versa.
  • 2) The extent to which the internship provides training that would be similar to that which would be given in an educational environment, including the clinical and other hands-on training provided by educational institutions.
  • 3) The extent to which the internship is tied to the intern's formal education program by integrated coursework or the receipt of academic credit.
  • 4) The extent to which the internship accommodates the intern's academic commitments by corresponding to the academic calendar.
  • 5) The extent to which the internship's duration is limited to the period in which the internship provides the intern with beneficial learning.
  • 6) The extent to which the intern's work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern.
  • 7) The extent to which the intern and the employer understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship.

If analysis of these circumstances reveals that an intern is an employee, then he or she is entitled to both minimum wage and overtime pay under the FLSA.

Learn more about the primary beneficiary test, here.

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