Should You Be Paying Your Summer Interns?

Summer is here and so are summer interns. Typically, internships are performed by students looking to get some hands-on experience with a chosen field. Some internships are paid and others are not. But, when is an intern requiredto be paid? The answer lies in whether or not the intern is really an “employee” as defined by the Fair Labor Standards Act. Courts and the Department of Labor have developed a seven part test to determine whether or not the primary beneficiary of the internship relationship is the student or the employer. If the employer is the primary beneficiary, then the intern is considered an employee and must be paid. If the student is the primary beneficiary, then the student’s work would not be required to be paid. There are seven factors in the test, and no single factor is determinative. The factors are as follows:

  1. To what extent does the intern understand that there is no expectation of compensation? Any prospect of compensation that the intern may have, whether express or implied, leans toward a conclusion that the intern is an employee. Conversely, if there is no expectation of compensation, and this is clearly understood by the intern, then the intern is not an employee, and thus would not be required to compensated.

  2. Does the internship provide training similar to what the student would obtain in an educational environment, including hands-on training that might be provided in an educational setting?

  3. Is the internship tied to the student’s formal education program? Does the student have course work that is tied to their internship work? Does the student receive academic course credit for performing the internship?

  4. Does the internship accommodate the student’s school commitments, either by conforming to the academic calendar or otherwise accommodating the student’s class schedule?

  5. Is the internship limited in duration to the period where the internship is providing the student with beneficial learning?

  6. Does the work compliment the work of paid employees or are the intern’s services used to displace the work that would otherwise be performed by entry level employees? Does the intern’s work provide significant educational benefits to the student?

  7. Is there an express understanding between the intern and the employer that the internship is conducted without an entitlement to a paid position at the conclusion of the internship?

Employers must carefully consider how their internship opportunities measure up in this seven factor test. If, at the end of the day, the employer comes to the conclusion that the internship primarily benefits the employer rather than the student intern, then the intern will in fact be considered an “employee” and is entitled to be paid.