Do Interns Qualify as Employees That Should Be Compensated?

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Businesses of all sizes in New York hire interns as it offers benefits for both parties. The intern gets valuable, hands-on experience and exposure in the field. With an internship program, the company receives additional assistance and a fresh perspective from younger talent who may be more tech-savvy. 

The program also gives the organization’s management mentorship opportunities that help them become better leaders. And it allows them to discover new and hidden talent as interns may become entry-level hires. Internship programs also help reduce employee workload for the organization. 

However, interns do not exercise “discretion and independent judgment” when performing their job duties. This means that if they are considered employees, they would be considered non-exempt and, therefore, would be entitled to minimum wage and overtime pay. However, under the Fair Labor Standards Act (FLSA), interns and students may not qualify as “employees” and, thus, may be required to be compensated for their work. 

Unfortunately, because employers aren’t always obligated to pay interns, some have used the program as a way to take advantage of free labor. Employers misusing internship programs may keep interns for longer than necessary or make false promises about future employment. 

The U.S. Department of Labor caught on to employers taking advantage of internship programs and established regulations to determine if the internship qualifies as paid or unpaid. The Internship Programs Under The Fair Labor Standards Act helps determine whether interns are entitled to minimum wages and overtime pay. 

The Seven Factors of the Intern Beneficiary Test 

Not all internships are created equal. The “primary beneficiary test” allows the court to determine if the intern-employer relationship qualifies the intern to be compensated. 

Intern-employer relationships mean there is one party that is the “primary beneficiary” of the relationship. The FLSA test examines the economic reality that one party benefits more than the other, helping the court determine if the intern earns the right to be properly compensated. Here are the seven factors of the Internships Program [1]: 

  1. The extent to which the intern and the employer clearly understand that there is no expectation of compensation. The intern should be aware and agree from the start that they will not be paid wages for their work. However, if compensation is promised or implied by the employer, the intern may qualify as an employee. 
  2. The extent to which the internship provides training. Some companies provide comprehensive training that is as extensive as an educational program in an institution that requires tuition. This means the intern would be benefiting from valuable training for free, making them the primary beneficiary. 
  3. The extent to which the internship is tied to the intern’s formal education program. If the internship is a coursework requirement or translates into academic credit, the intern is likely to be identified as the primary beneficiary and may not be required to be compensated. 
  4. The extent to which the internship accommodates the intern’s academic commitments. If the internship was arranged and fits into the intern’s schedule to accommodate their academic calendar, the intern is likely to be considered the primary beneficiary. 
  5. The extent to which the internship’s duration is limited. The internship should provide the intern with the experience, skills, and learning as defined by the internship program.
  6. The extent to which the intern’s work complements the work of paid employees. If the employer uses the intern to perform work that displaces paid employees, the employer becomes the primary beneficiary. As the primary beneficiary, the employer should compensate the intern. Interns are not meant to be a cost-effective solution that allows employers to let their employees go and replace them with free labor. 
  7. The extent to which the intern and the employer understand that the intern is not entitled to wages. At the completion of the internship program, there should be no confusion that the intern is to expect to be paid for their time spent as an intern. 

The courts have described this test as flexible. If you need help determining if you are qualified to receive compensation as an intern in New York, Cilenti & Cooper, PLLC provides strong, knowledgeable guidance and legal representation to workers in the New York Metropolitan area who are not being paid their legal wages or overtime compensation. 

If you have questions about whether you should be paid appropriately, contact us or call (718) 841-7474.

Sources: 

[1] https://www.dol.gov/whd/regs/compliance/whdfs71.htm

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