Intern or Employee?

Are you considering hiring any interns this year?

Internship programs can benefit both employers and the interns. Students gain valuable work experience and exposure to real-world work situations. Employers get to preview their skills and work habits — and when the time comes, have the chance to hire workers who are already familiar with the business. It can be a real win-win situation.

But in recent years, there have been several high-profile cases in which unpaid interns have sued their employers, claiming that they were, in fact, full employees and should have been paid at least minimum wage. While an internship is supposed to be an educational opportunity for the intern, in these cases the interns said they were simply used as temporary help, filling in for full-time paid employees. They claimed the work they did was for the benefit of the employer, not for the benefit of the interns.

So, do you have to pay your interns?

You have a choice whether to pay your interns or not. The thing to keep in mind is that the Department of Labor (DOL) will take a closer look at your program when you choose to use unpaid interns. This is because for-profit companies are required to pay employees, but are not required to pay interns. As with the classification of workers as employees versus independent contractors, some unscrupulous employers will attempt to misclassify employees as unpaid interns to gain an unfair advantage in the marketplace.

The safest option is to pay them. If you pay them at least minimum wage and pay overtime if they work more than 40 hours a week, this eliminates any questions about whether these workers are properly classified as interns or employees. Your “interns” are actually paid part-time employees. As long as you follow the rules of the Fair Labor Standards Act (FLSA) you can structure your internship program however you want, and assign them whatever duties you’d like.

However, if you choose to structure your program with unpaid interns, there are some criteria you should take into consideration. Up until 2010, the DOL used a fairly strict “six-factor test” to determine if your internship program was a legitimate educational opportunity — and not simply a sneaky employer trying to avoid paying workers what they are due.

How can you decide if it’s OK for your interns to be unpaid?

Over the years, four federal appellate courts rejected the DOL’s six-factor test and instead used a “primary beneficiary” test to determine if interns are actually employees. Recently, the DOL decided to adopt the same standard. According to a new Fact Sheet, the DOL now considers the same seven factors as the courts when deciding if a worker is an intern or an employee:

  1. Do both the intern and the employer recognize that the position is to be unpaid? Any expectation of compensation (express or implied) suggests the relationship is that of an employee, not an intern.
  2. Does the internship provide training similar to that provided in an educational environment? If there is little or no instruction or the intern’s tasks are largely “rote” and don’t require training, this argues in favor of the relationship being employer/employee, not an internship.
  3. Is the program related to the intern’s formal education program? For instance, is there integrated coursework, or do interns receive academic credit? If there’s no relationship to their education (for instance, an Art History major working in the Engineering department at a manufacturing plant) this indicates the worker is more likely an employee, not an intern.
  4. Does the internship accommodate the student’s academic commitment? For instance, does it coordinate with the academic calendar?
  5. How long does the internship last? The position needs to provide continuous learning. The longer the internship lasts, the more it begins to look as if the “intern” is actually simply an unpaid employee.
  6. Does the intern assist other employees with their work, or does the intern’s work replace the work of other employees? An unpaid intern cannot be used in place of other (paid) employees. The internship is supposed to provide them with significant educational benefit, so they can work alongside your existing employees, to learn about their job duties, but they should not be used as substitutes for regular employees.
  7. Do both the intern and the employer understand and agree that there is no promise of permanent employment waiting at the end of the internship period? If the intern has been promised a “regular” paid job at the end of their internship period, the internship looks less like an internship and more like an unpaid probationary period (which would be illegal under the terms of the FLSA).

the new intern

The important thing to keep in mind: according to both the courts and the DOL, these factors are a flexible test — a spectrum, not a “bright line.” Each internship must be evaluated individually, on a case-by-case basis.

While this gives employers more leeway with establishing internship programs than the previous six-factor test, it’s important to make sure you carefully analyze any proposed internships to ensure they’ll fall on the correct side of the spectrum. For that reason, I strongly recommend you consult with your employment law advisor or attorney for guidance if you’re thinking of bringing any unpaid interns on board.

What else can you do to protect your organization?

It’s also a good idea to make sure you’re accurately documenting the hours these interns put in on the job. Yes, they’re unpaid, so you don’t need to track their time to compute payroll. But tracking their hours (and, even better, tracking the project, department, or task they’re working with) can help you document the educational nature of their work. And if the DOL comes along and decides your interns should actually be paid (or a disgruntled intern takes action and the courts decide you should have been paying them), you’ll have a record of the hours they actually worked, so you don’t end up overpaying.

Fortunately, Acroprint offers several options that can help record your intern’s hours. And if you’re not recording your regular employees’ work time, there’s no time like the present to start. Better yet, these options won’t break the bank for you! Contact us or visit our online store to see our full selection of time tracking solutions.

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