Can I Bring in an Intern and NOT Pay Them?

The answer is now YES.  For many years employers brought in interns and told them they were there for the experience.  There was then a crackdown and we were told unless an intern was there totally to learn and do no work, they were supposed to be paid.

As of January 2018, the U.S. Department of Labor Wage and Hour Division issued Fact Sheet 71 which provides general information to help determine whether interns and students working for “for profit” employers are entitled to minimum wages and overtime pay under the Fair Labor Standards Act.  While they require employers to pay employees, they state interns and students may not be employees in which case they do not required compensation for their work.

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Courts have provided the following seven factors as  the “primary beneficiary’ test to determine whether an interns or student is an employee.

In short, this test allows courts to examine the “economic reality” of the intern-employer relationship to determine which party is the “primary beneficiary” of the relationship. Courts have identified the following seven factors as part of the 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.

Courts have described the “primary beneficiary test” as a flexible test, and no single factor is determinative. Accordingly, whether an intern or student is an employee under the FLSA necessarily depends on the unique circumstances of each case.

As always, because each case is different, you should be in contact with your labor attorney to help you make this decision.

 

Andrew Jacobs