Update: Don’t Forget About Your Interns… Should You be Paying Them?

Should you be paying your interns? The federal Department of Labor (“DOL”) isn’t forgetting about this issue, and you shouldn’t either.  Last year, we published an article on the factors the DOL was using to determine whether interns should be paid or whether a company could legally not pay their intern hire.  Last month, the DOL published what’s called a “Field Assistance Bulletin” (read it here) clarifying what employers should be thinking about when deciding whether (or not) they should pay their interns. The Fair Labor Standards Act (“FLSA”) requires that all employees be paid minimum wage.  So, basically, the new DOL bulletin discusses HOW to know if your interns are employees.

The KEY to the DOL’s new policy is “the primary beneficiary test.”  This means that employers have to ask themselves, “who is primarily benefitting from the intern being here and doing what he or she does?”  If it is the intern who is gaining the primary benefit, then your company may be in the clear in terms of needing to pay.  But, if the company really is getting the primary benefit, the intern is an employee and must be paid.

Here are seven factors that the DOL says it will use to determine if interns are employees:

1. 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 vice versa.

This is a pretty straightforward factor.  When in doubt, we recommend a written document that both the employer and the intern review and sign which specifically spells out that there is an agreement of no expectation for compensation.

2. The internship provides training that would be similar to that which would be given in an educational environment, including clinical and other hands-on training provided by educational institutions.

It is important that you teach, work with and train an intern.  This training would be different than on-the-job training or “on-boarding” training provided to regular paid employees.  If your “intern” is being trained the same as an employee, then they are probably an employee and should get paid.  An example of nearly constant “on-the-job” training would be a medical or legal intern working in a clinical rotation setting.  They are nearly constantly being supervised by a senior member of the organization and receiving training on most or all activities and assignments.

3. The internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit.

What the DOL is getting at here is that the more you appear to be working with any school or academic program that the intern is currently attending the more you will fit the work your intern is performing into what they are learning in school.  The more the internship and school are closely tied, the more likely the intern can be unpaid.

4. The internship accommodates the intern’s academic commitments by corresponding to the academic calendar.

#3 and #4 are clearly intertwined.  Make sure that your intern’s work schedule does not conflict with their regular class schedule, including exams.  Similarly, if the intern is only working for you on school breaks . . . that could be a red flag.

5. The internship’s duration is limited to the period in which the internship provides the intern with beneficial learning.

All that this means is that, once the intern has worked for your company long enough that they are not requiring on-the-job training and learning and are starting to perform work that any regular employee would do without supervision, it’s time to start paying them (or end the unpaid internship).

6. The intern’s work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern.

What the DOL is saying here is that a company cannot (or should not) simply hire an unpaid intern to do work that a paid employee would normally do.  A common example of this issue is when employers hire interns to file paperwork and sort through backlogs of files that they don’t necessarily have the budget to hire someone to do on a paid basis.  The DOL says: no go.  You have to pay a clerical worker under FLSA.

7. The intern and the employer understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship.

The DOL wants to ensure that there is an agreement between the intern and the employer that the intern is there for a certain amount of time to learn what can be learned, in conjunction with his or her education at a college, graduate or vocational school.

Still a bit confused about some or all of these factors?  We don’t blame you.  Luckily, Central Maine Human Resources Association (CMHRA)’s March program will feature speakers from the federal AND state Departments of Labor and will be ready, willing and able to answer your questions about interns and other wage information.  Click HERE to register for the CMHRA March program today!

This article is not legal advice but should be considered as general guidance in the area of employment and corporate law. Bryan Dench, Amy Dieterich, Jordan Payne Hay, and Rebecca Webber are employment and labor law attorneys; others at the firm handle business and other matters. You can contact us at 207.784.3200. Skelton Taintor & Abbott is a full service law firm providing legal services to individuals, companies, and municipalities throughout Maine. It has been in operation since its founding in 1853.