Do You Need to Pay Your Intern?Mar 29, 2022
Your company wants to hire an intern for the summer. This person will help your business, and will give this person insight into the way your business operates. Its a win- win for both the company and the intern. But do you need to pay the person for the hours worked? Does this person work for free just because you are training them on your industry or real life day to day version of what their career path will look like? The answer lies on whether the person is an intern, volunteer or an employee.
There is a distinction between public sector employers and private. The FLSA requires “for profit” employers to pay employees for their work. Interns and students may not be considered employees and may not need to be paid.
Employee: If the person is considered an employee, then the company needs to comply with the Fair Labor Standards Act (FLSA) and must be paid at least the minimum wage and time and a half for overtime. An employee is a worker who performs services for the employer, and the employer controls how and what the employee will do. The Fair Labor Standards Act (FLSA) defines the term "employ" to include "to suffer or permit to work" for an employer.
Volunteer: A volunteer donates his or her time and energy without receiving financial or material gain. According to the Bureau of Labor Statistics (BLS), the most common volunteer activities are fundraising, tutoring and teaching. Guidelines exist for volunteers in the public and nonprofit sectors in which payment of minimum wage or overtime would not be necessary. The individual would need to a) work toward public service, religious or humanitarian objectives; b) not expect or receive compensation for services; and c) not displace any genuine employees. Under FLSA regulations, an individual cannot volunteer services to a private, for-profit company.
Intern: If the person is an intern, you may not have to follow the FLSA, as the person may be exempt. Many companies develop and implement intern programs that allow students the opportunity to obtain real-world experience in their selected fields of study. For someone to be considered an unpaid "intern" or a "trainee" under FLSA regulations, specific criteria must be met as well. According to 2018 guidance from the DOL, the following seven factors are evaluated in determining whether an employment relationship with an intern or student exists:
So how to do you decide if the person is an employee or an intern- if you have to pay the person or not, and what amount needs to be paid.
Criteria: There are 7 questions to ask when determining whether you have an employee or an intern:
1. The extent that Both parties understand that the intern is not entitled to compensation. Any promise of payment or compensation suggests an employee
- The internship provides training that would be given in an educational environment. (clinical or hands on training)
- The intern's completion of the program entitles him or her to academic credit; how much the internship is tied to formal education program.
- The internship corresponds with the academic calendar.
- The internship's duration is limited to the period when the internship educates the intern.
- The intern's work complements rather than displaces the work of paid employees while providing significant educational benefits.
- The intern and the employer understand that the internship is conducted without entitlement to a paid job at the internship's end.
No single factor determines the answer. Rather it is a primary benefit test.
Class Credit: Although earning class credit for the internship benefits the intern and can be required by the employer, class credit is not considered wages and should not be substituted for wages.
I hope that provided some clarity as to the difference between interns, volunteers and employees. This is a tricky area of the law and an area that is litigated often. So when it down, pay the person for all hours worked. If the person is a true intern, they you will want to make sure that all of the elements are properly met. The concern here us misclassification. If you classify a person as an intern (for example, required for class credit) and they truly are not an intern according to the factors, the company may be responsible for payment of the hourly rate and all hours worked over 40 hours. This could be a substantial cost to the company.
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