Internships are a great way for students to build new skills and gain experience. Although interns are often unpaid, internship programs are still subject to federal and state labor laws. Whether you are a new startup or a seasoned business owner, it’s important to know the legalities of labor laws, especially when offering unpaid internships.
Fair labor standards act guidelines
One common misconception among employers about internships is that many think that they do not have to pay interns or can simply hire internship candidates as contractors. This isn’t necessarily true. If the internship does not satisfy the test for an unpaid internship, interns must be paid as an employee. However, it’s possible that an intern could be deemed a contractor, which is unlikely in most cases.
In addition to myriad changes to state and federal labor laws over the past decade, in 2018, the Department of Labor changed its test used to determine whether an internship is unpaid or not.
This federal law, known as The Fair Labor Standards Act (FLSA), requires all “for-profit” companies (and some non-profit companies) to pay all of their employees. FLSA’s test for employers is used to determine whether or not interns should be compensated for their work. Before 2018, the test required that all six elements be met to determine whether or not an intern should be paid.
Today’s updated FLSA guidelines are more flexible; not every factor must be met. Commonly referred to as the “primary benefit test,” there are now seven non-exclusive factors that may entitle interns to be paid at least minimum wage:
What are the requirements for an internship?
Unfortunately, there is no clear definition of what is considered an internship regarding federal law. However, the broad definition considers paid internship (AKA apprenticeships) as allowing interns to gain practical experience by being tasked with duties typical of the day-to-day work of said profession. In unpaid internships, the responsibilities tasked must be considered adjacent to the work that is regularly done; that is, employers cannot task unpaid interns with assignments in a manner that the intern takes on the role that would have been otherwise assigned to a paid employee.
While a paid intern is simply considered an employee, an unpaid intern is a student working for an employer for educational purposes. The “primary benefit test” ensures that the student is the primary beneficiary of the internship relationship. Still, there are some general rules of thumb to follow for consideration:
Is the student getting academic credit? If not, it’s a strong indication that the internship should be a paid position.
In writing, has it been made clear that the internship is unpaid? Transparency is paramount. Any internship opportunities or employment offers should be in writing, and intentions should be clear. There should be no question as to whether or not the student will be paid.
Is the internship flexible? Does it allow the intern to go to classes and attend other academic commitments? It may be hard to argue that an internship is not paid employment if an employer is inflexible with a student’s academic commitments.
Is the intern performing services that otherwise would be performed by employees? Unpaid Internships are not meant to displace paid work; they are meant to give students “real-life” experience in the field.
Most importantly, internships should have clear educational components — not just actionable work. The goal of an internship is to learn and gain experience. It’s important to set clear expectations for potential interns. Many may expect their internship to turn into full-time employment, so it is key to explain in writing that there is no guarantee of employment after the internship or after graduation. Like any other employment, you should make clear employment is “at will.”
This content was originally published here.
