Over the past few years, employers may have faced harsh criticisms for hiring unpaid interns, especially in California. According to the FLSA (The Fair Labor Standards Act), “for-profit” employers must compensate employees for their work. Non-profit and government agencies are exempt from this policy. However, it is possible that Interns and Students may not be considered “employees” under the FLSA, meaning payment for their work is not required.
Yes, very confusing.
So how does one determine whether an intern or student falls within the “employee” category? There is a test! Many courts have been using the “primary beneficiary test” to examine the “economic reality” of the relationship between intern and employer. In other words, who is benefiting the most from this relationship?
Here is the criteria for the test:
- Does the intern and the employer clearly understand that there is no expectation of compensation? A promise of compensation, expressed or implied, suggests the intern is an employee.
- Does the internship provide educational training, including the clinical and other hands-on training provided by schools?
- Is the internship tied to the intern’s formal education program by integrated coursework or the receipt of academic credit?
- Does the internship accommodate the intern’s academic commitments by corresponding to the academic calendar?
- Is the internship’s duration limited to the period in which the internship provides the intern with beneficial learning?
- Does the intern’s work complement, rather than displace, the work of paid employees while providing significant educational benefits to the intern?
- Does the intern and the employer understand that the internship is conducted without entitlement to a paid job at the end of the internship?
In other words, an intern or student working for your organization is not entitled to minimum wage or OT pay if and only if the above criteria are satisfied. The internship must be educational and entirely beneficial for the intern you hire to train.
What does this mean for employers?
During the hiring process, from point of job posting to hire, you must make it clear to your intern candidate that it is unpaid, that there is no potential for this to turn into a full-time position, and that you hope to enhance their skill set with meaningful work. Otherwise, it is required by law to provide an intern with at least the minimum wage.
Check out our latest Marketing Intern posting on our Careers Page for ideas!