Summer Interns: What you Need to Know Before you Hire

15 Apr Summer Interns: What you Need to Know Before you Hire

It is that time of the year. I don’t mean baseball — I mean hiring summer interns. 

I’m reminded of this because my colleague posted something that is important to remind people. Summer intern does not equal unpaid or free labor. In fact, in most situations, a summer intern is an employee — they should be treated as one, paid as one, and covered under policies such as workers comp as an employee. And, by the way, if they are employees you do have to ensure that they are making minimum wage. 

There are a couple things you can do if you think that your employee, an intern, is somebody that you could not pay. The subject of that is what the Department of Labor calls the primary beneficiary test under the Fair Labor Standards Act. 

So, what does that mean?

The primary beneficiary test says that when you look at all factors of the relationship that the primary entity that gets the most benefit out of the relationship is the intern — the student. The Department of Labor and the Fair Labor Standards Act have seven factors to determine this primary beneficiary test, which we are going to take a look at. 

The single most important thing to remember is that these cases are highly fact-specific. So, if you are not entirely sure, it is going to be difficult to draw a bright line for your attorney or HR department to determine whether an intern is the primary beneficiary, and therefore can be an unpaid intern, or if the employer is the primary beneficiary and the intern has to be paid minimum wage. 

Here are the factors: 

1. The clear understanding between the intern and the employer that this is unpaid. If you even hint at some kind of payment (even a travel stipend), chances are that intern is going to be an employee. You must be absolutely clear that there is no expectation of payment. 
2. The employer provides training that is similar to what they would receive if they were in an academic environment. If the training that the employer gives looks anything like a class with a professor, then you might consider them an unpaid intern. 
3. The internship is tied to the intern’s formal education program. If they are receiving academic credit for the work they might an intern, interestingly enough they have to pay to be in your internship program because they are getting academic credit for it. 
4. The internship accommodates the academic schedule of the student. If you have a summer intern that is also taking classes, and you’re working around their class schedule, that is definitely a sign of an intern. 
5. The internship duration is limited to the time that it provides beneficial learning to the student. It will usually be short term. If the intern is only coming in for part of the summer term or for a semester, you can consider that short term.
6. The intern’s work complements rather than displaces the work of an employee. An employer must provide a significant learning experience for the intern, but it adds to the work of an employee, rather than taking away their work. 
7. The intern and the employer understand that the internship is not a try out for a job. Many internship programs are tryouts for jobs. If it is clear that there is no expectation on either side that there will be a job waiting — whether guaranteed or not — there must be no entitlement to a job. 

Take a look at these seven factors and balance them out. If it looks like you have the qualities of an intern, you may be able to host an unpaid intern in your organization. There is no single one of these factors that is targeted for preference by the courts or Department of Labor. The government looks at all these factors, and you should be as well, when you’re looking to have interns. 

Here is the last thing I want to make sure employers understand: if you’re paying your interns minimum wage, they are going to be eligible for overtime, unless they meet one of the exemptions under the Fair Labor Standards Act. 

If you have an intern who puts in fifty hours in a week, say they are working on a significant project with a tight deadline, you owe them ten hours of overtime at whatever their rate is. Yes, you do have to be mindful of minimum wage laws. Just because they are an intern does not mean that you are exempt from any standard. 

Bear in mind that in some states minimum wage and benefits laws vary with the number of employees in your organization. If you are close to an important threshold number of employees and you hire an intern you may have exceeded the threshold and you may be obligated to provide additional pay or benefits to your regular employees and the intern. 

When you’re thinking about a summer internship, please consult with an attorney or HR representative to make sure you understand whether or not you have to pay your interns. All of this being said, the safest course of action — pay your interns as an employee with minimum wage. 

Check out our blog to stay up to date on employment law issues.