Update: US Department of Labor recently updated the criteria related to the “primary beneficiary test”. We have made an updated blog post reflecting that change that you can read by clicking here.
Summer is upon us, and this means many workplaces will see an infusion of interns looking to boost their resume and gain valuable on-the-job experience during their school breaks. These internships offer additional benefits to employers, namely recruiting and grooming talent for future employment in the organization.
The question is: when is a company required to pay summer interns? There is a common misconception these individuals do not need to be compensated for their work if they are classified as interns. The misclassification of employees as unpaid interns can lead to liability for employers, and has the potential to lead to costly lawsuits over unpaid wages under the Fair Labor Standards Act. In order to avoid misclassification, the US Department of Labor has developed a set of criteria to differentiate an internship from employment:
- The internship, or training, must be similar to what an educational environment or vocational school may offer.
- The training must be for benefit of the trainee.
- No regular employees are displaced by the trainee.
- The organization does not immediately benefit from the activity of the trainee.
- The trainee is not necessarily entitled to a job at the end of the internship.
- The trainee is aware they are not entitled to wages for hours worked during the internship.
If a company’s internship program is unable to comply with all six of these guidelines, then the worker cannot be classified as an unpaid intern, and must be paid at least minimum wage as an employee of the organization.
In order to ensure your internship program complies with state and federal guidelines, contact us at (425) 250-0205.