Summer is here, and with it comes higher temperatures, employee vacations, and…interns. And the question on most employers’ minds regarding interns is: Do we have to pay them? There is no simple answer to that question, largely because there is no federal statute or regulation that positively calculates when an intern must be paid.
Most states are the same and provide little or no guidance. The only thing that is certain is that the United States Department of Labor (“DOL”), and similar state agencies, have turned up the heat in scrutinizing unpaid interns to determine whether they should have been paid like other employees.
To determine whether an intern should be paid, first ask yourself whether the intern is in fact an employee. If the intern’s position is like most other positions at your firm or company, then the intern is most likely an employee and should be paid minimum wage and overtime. In other words, if it walks like a duck, flies like a duck, etc.
But if you think the intern is not an employee, be prepared to prove it. If you are wrong and the intern is deemed to be an employee, then your company may owe the intern for unpaid back wages, and your company also may be liable for wage and tax penalties. So to establish that an intern is not an employee, we look to the multi-part test provided by the DOL.
Unfortunately, this test has all the accuracy of a bow and arrow in a windstorm. Such as it is, it is the only test we have and it should be applied with a heavy dose of second-guessing. Analyze the intern position by asking yourself the following:
• Is the intern being trained? Here, “training” does not mean that the intern gets to meet interesting people and observe a real work environment while answering phones and filing papers. It means that someone in the company (or an outside person) is instructing or teaching the intern on how to do something on a regular basis. The quality of the experience should be similar to the training one might get in a more formal educational environment. Training must be ongoing throughout the internship.
• Who benefits from the internship primarily? The internship must benefit the intern primarily if it is going to be an unpaid internship. In other words, the person who is not being paid a dime to spend his or her summer days with the company must be receiving some real benefit and that real benefit should exceed the benefit that the company receives. If the company receives most of the benefit, it should be paying the intern—at least that is how the DOL sees it.
• Is the intern doing work that displaces other employees with little or no supervision? If the intern performs the same type of work as other employees with very little supervision, then there is little to distinguish the intern from other employees and the intern should probably be paid. But if the intern is being closely supervised on a regular basis and is being shown how things work on a regular basis, then the intern looks more like a bona fide intern and less like an employee. The intern can do some work, just not enough to displace other full-time, part-time, or temporary employees.
• Is the intern entitled to a job at the end of the internship? If so, then the internship should probably be paid because employees are entitled to be paid when they are trained for a specific job. If there is no promise or expectation of future employment at the end of the internship, the time spent looks less like employment.
• Does the intern expect to be paid a wage? Make it clear to the intern at the beginning (i.e., during the hiring process) that the intern will not be paid and have the intern agree to it in writing.
Overall, the above factors set forth a risk analysis that must be weighed and analyzed. If you look at all the factors and determine that it is a close call, your risk of incurring liability for failing to pay the intern is probably pretty high. To avoid that risk, employers should err on the side of paying interns and should only decide not to pay interns when the company has a high level of confidence that the internship does not constitute employment.
Keep in mind that the more the intern performs tasks similar to other employees that benefit the employer, the more the intern looks like an employee and the more it looks like the company guessed wrong by failing to pay the intern a minimum wage and overtime.
Have a great summer and think of this article as sunscreen that will help to keep you from getting burned by the problem of unpaid interns.
About the Author:
Richard Bromley represents employers and individuals in all aspects of state and federal labor and employment litigation including jury trials, binding arbitration, and mediations. He specializes in claims involving discrimination, harassment, retaliation, defamation, wage claims, and other workplace claims.
Richard E. Bromley, Counsel, Nixon Peabody
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