Are You Paying Your Summer Interns Correctly?

If it’s summer, it’s not only a needed break for students but a time for them to earn real-life work experience and learn more about the world awaiting them after their studies are complete.

As an employer, there are many things to keep in mind if you are bringing on interns into your organization. The first is to categorize your interns accordingly.

If an employer’s interns are “employees,” they are subject to the Fair Labor Standards Act (FLSA) and must be paid at least the minimum wage. Interns may be exempt from the requirements of the FLSA if they can be categorized as “trainees” as defined under the law.

In January 2018, the U.S. Department of Labor (DOL) provided updated guidance to reflect the criteria to identify the primary beneficiary in determining whether an employment relationship with an intern or student exists.

The seven criteria are as follows:

  1. Both parties understand that the intern is not entitled to compensation.
  2. The internship provides training that would be given in an educational environment.
  3. The intern’s completion of the program entitles him or her to academic credit.
  4. The internship corresponds with the academic calendar.
  5. The internship’s duration is limited to the period when the internship educates the intern.
  6. The intern’s work complements rather than displaces the work of paid employees while providing significant educational benefits.
  7. The intern and the employer understand that the internship is conducted without entitlement to a paid job at the internship’s end.

According to the DOL, “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.” Refer to the DOL website for more information on internship programs.

When an employer is the primary beneficiary of the relationship, interns should be paid as employees—at least minimum wage and overtime compensation when appropriate. 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.

Employers are encouraged to consult with legal counsel when designing and implementing an internship program.

If you have any questions, please reach out to your assigned DecisionHR Human Resources Business Partner at 1-888-828-5511.