The US Department of Labor (DOL) is using a new seven-factor balancing test to determine whether a person is an intern who does not have to be paid or an employee with
the protection of wage laws.
The new “primary beneficiary test” measures whether the intern or employer is the primary beneficiary of the relationship. If the intern is the primary beneficiary, he or she does not have to be paid. If, on the other hand, the employer is the primary beneficiary, the intern is considered to be an employee and must be paid.
The factors that are considered in determining the “economic reality” of the parties’ relationship are:
* 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 the lack of such a promise suggests the intern is not an employee).
* 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.
* The extent to which the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit.
* The extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic calendar.
* The extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning.
* 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.
* 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.
Employers should, therefore, make sure their agreements with interns are in writing. Those written agreements should make clear that the internship is unpaid and that the employer is not promising the intern a job upon completion of the internship.
The internship should be for a fixed period of time, whether measured in hours, weeks, or months, or by the academic calendar. If the intern is still in school, his or her schedule should be flexible enough for the intern to meet academic commitments.
Further, employers must ensure that the work performed by the intern reflects a practical application of the individual’s educational background. Ideally, the work to be performed will be specified in a written job description that briefly identifies the specific work to be performed and the benefits to the intern of doing such work.
Remember that because the experience should benefit the intern, the intern should be learning skills that he or she can use for other employers rather than skills that are specific to your particular organization.
It’s also a good idea to have someone from the organization act as a mentor to the intern, scheduling frequent check-ins with the intern to allow the intern to ask questions and the mentor to evaluate the intern’s performance, offering tips for improvement.
In the past, the DOL used the following rigid six-part test; if any one of these factors was not met, the intern was classified as an employee.
* The internship, even though it includes actual operation of the facilities of the employer, is similar to training which would be given in an educational environment;
* The internship experience is for the benefit of the intern;
* The intern does not displace regular employees, but works under close supervision of existing staff;
* The employer that provides the training derives no immediate advantage from the activities of the intern; and on occasion its operations may actually be impeded;
* The intern is not necessarily entitled to a job at the end conclusion of the internship; and
* The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.
Whether you are an employer, employee, intern or independent contractor, please feel free to contact usif you have questions about employment classification issues.
