According to Business News Daily, “Small businesses have a big opportunity when it comes to interns. By developing and working with interns, you can foster growth in an inexperienced individual who could one day become a major player for your company.”
As a business owner, you may be considering starting an internship program for your company. Internships can be beneficial to both you as a business owner and the intern. Interns can receive hands-on training in their field of interest while assisting your company in reaching its goals.
However, it is important to keep in mind the various legal considerations and requirements associated with this specific type of hire.
There are often misconceptions about the purpose of running an internship program. Some businesses approach internships as opportunities to obtain unpaid labor while failing to properly structure these internships in ways that actually help the interns involved.
An internship is a way of encouraging and building a younger person’s career and shaping their future. When designing your program, consider the following questions.
- What is the timeline for your internship program?
- How will interns interact with your employees?
- What types of work will interns do. How will this work help them learn?
- What are the applicable state and federal regulations?
- Will your program collaborate with existing educational clinics or training programs?
- How will you select your interns?
These important considerations help you structure your program for your and the intern’s benefit. Without structure, you and the intern could end up frustrated with unmet expectations of a beneficiary relationship.
Compensation for Interns?
When it comes to interns’ compensation, it is common for many programs to deviate from federal law requirements. This is common when considering implementing an unpaid internship program.
Unbeknownst to many, interns may qualify as employees under the Fair Labor Standards Act (FLSA) and may consequently be entitled to the same minimum wage and overtime standards that apply to workers. The “primary beneficiary test” is the predominant analysis courts use to determine whether an intern is considered an employee for FLSA purposes. (1)
Primary Beneficiary Test Factors
Generally, the primary beneficiary test examines to what extent the internship benefits an intern. Although there is no hard and fast rule regarding this test, courts consider the following seven factors when assessing whether an intern should be classified as an employee for FLSA purposes.
- The degree to which the business and intern have discussed compensation. More specifically, courts consider whether compensation has been promised or implied. The existence of such a discussion suggests an employer-employee relationship.
- How comparable your intern training program is to a hands-on or clinical education program.
- Whether the program is connected to an academic institution or formalized educational program and to what extent an intern receives academic credit.
- How accommodating the internship is to the academic program or calendar the intern may be committed to.
- The duration of the program.
- Whether the intern’s labor replaces or supplements paid employees while still providing educational advantages to the intern.
- The existence or nonexistence of paid employment at the end of the internship period.
There are some exceptions to the applicability of the primary beneficiary test when considering nonprofit and charitable organizations. The internship may be exempt from this standard and unpaid if the internship is with a governmental organization or one comprised mostly of volunteers.
According to the FSLA, young people who “volunteer to perform services for a state or local government agency or who volunteer for humanitarian purposes for non-profit food banks or who volunteer their time, freely and without anticipation of compensation, for religious, charitable, civic, or humanitarian purposes to non-profit organizations” are exempt. “Unpaid internships for the public sector and non-profit charitable organizations, where the intern volunteers without expectation of compensation, are generally permissible.” (1)
Using these guidelines as a general rule can help you decide whether your business will provide enough education or benefits to interns and whether or not you should pay your interns.
If you are in the process of developing an internship program, we can help you comply with local and federal regulations while building an internship program that meets your specific business needs. Contact us online or call and schedule an appointment with us today. Our knowledgeable team of business attorneys wants to help you build the next generation of workers’ skills and experience.
 U.S. Dep’t of Labor, Wage & Hour Div., Fact Sheet #71: Internship Programs Under the Fair Labor Standards Act (Jan. 2018), https://www.dol.gov/agencies/whd/fact-sheets/71-flsa-internships.