This time of year, many organizations start interviewing potential candidates for summer internships. Internships can be valuable both for interns and business owners. In exchange for work, interns can acquire on the job skills
In many organizations, questions will arise over issues such as the number of hours an intern will work and whether or not an intern should be paid. It’s important to note that these decisions are not left up to the organization. The US Department of Labor’s Fair Labor Standards Act addresses this issue and sets criteria that companies must use to determine whether or not an intern must be classified as an employee and receive compensation. We will review these criteria and some other important issues below.
To Pay or Not to Pay
In January of 2018, the DOL approved the primary-beneficiary test for deciding whether interns are employees that must be paid or whether they can serve as unpaid interns. Before the change, the DOL required employers to meet six rigorous qualifications if an intern would not be paid. Employers felt the six-factor test was too strict and did not reflect 21st century workplace conditions. The DOL responded by revising FLSA guidelines for unpaid internships.
Criteria for Unpaid Internships
- Both the intern and the business owner must understand and agree that the employer won’t provide compensation.
- The position provides the intern with training similar to what they would receive from an educational institution.
- Internship completion must include academic credit.
- The intern will complete duties on dates that don’t conflict with their academic calendar.
- The internship only lasts as long as necessary to provide the intern with education.
- Both parties understand there is no future paid job offer associated with the internship.
- The work the intern performs doesn’t displace permanent employees.
The employer does not have to meet all of the seven factors, but should evaluate the extent to which the internship meets each of the factors in order to decide who benefits most. If the company is the main beneficiary, the company should provide compensation.
If your company decides to use unpaid interns, protect yourself by revising documentation to reflect the seven factors. Create a written internship policy and review it with each intern to make sure there is an understanding of your arrangement. Have interns sign an acknowledgment that they have received the policy to avoid potential liability.
Employment laws are subject to frequent change. When your business has questions, business law and employment attorneys Simon | Paschal PLLC has answers. Contact us for your employment or business law needs today.