Internships can provide valuable working experiences for college and high school students. Talented students serving as interns can also bring enthusiasm and savvy insights into your workplace, particularly as some of us grapple with ever-evolving technology that young people seem to be facile with well before adults.
However, it’s important to remember that students serving as interns at for-profit companies are not free labor. Each company that hosts interns has both a moral responsibility to provide them with a valuable experience, and a legal responsibility to meet the requirements of the U.S. Department of Labor (DOL). One of the DOL’s focuses is to ensure that interns are not being treated as employees without the benefits to which employees are entitled.
The DOL’s Wage and Hour Division has updated information on its enforcement policies to align with recent case law to “eliminate unnecessary confusion among the regulated community, and provide the Division’s investigators with increased flexibility to holistically analyze internships on a case-by-case basis.”
Generally, the FLSA does not require that companies compensate interns for their work, as long as they do not fit the FLSA’s definition of an employee. If it turns out that interns are being treated like employees, then those individuals are entitled to the benefits of being an employee, including both minimum wage and overtime pay under the FLSA.
As part of the updated guidance, DOL changed the test it uses to determine whether interns and students should be considered employees under the FLSA. DOL now will use what it calls a “primary beneficiary test.”
The DOL lists seven components of this primary beneficiary test:
1. 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.
2. 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.
3. The extent to which the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit.
4. The extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic calendar.
5. The extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning.
6. 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.
7. 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.
When looking to create an internship position, keep these seven aspects in mind when crafting the position to ensure that your business is both aligned with DOL regulations and providing a valuable internship experience to students.