We all know that employees have to be paid, but when it comes to interns things are a bit less black and white. There used to be six standards that had to be met in order to establish that an intern qualifies to work unpaid:
1. The internship, even though it includes actual operation of the facilities of the employer, is similar training which would be given in an educational environment; 2.The internship experience 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; and 6.The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.
However, more recent court rulings have used the “primary beneficiary test” to determine whether an intern or student is, in fact, an employee under the Fair Labor Standards Act. In short, this test allows courts to examine the “economic reality” of the intern-employer relationship to determine which party is the “primary beneficiary” of the relationship. Courts have identified the following seven factors as part of the test:
- 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.
- 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.
- The extent to which the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit.
- The extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic calendar.
- The extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning.
- 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.
- 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 or student is actually an employee, then he or she is entitled to both minimum wage and overtime pay under the FLSA. On the other hand, if the analysis confirms that the intern or student is not an employee, then he or she is not entitled to either minimum wage or overtime pay under the FLSA.
You can see how it is easy to get confused by what is allowed and what is not. If you would like to outsource work to an employee, virtual assistant, or intern, different rules would apply for each. It is important to know what rules govern your situation so that you can stay within the legal guidelines and don’t end up owing way more than you bargained for.
Need help determining what type of employee you have? Looking to hire but want to make sure you stay within the guidelines of an intern or independent contractor? I offer legal and business consulting to help you through that. Contact me below!