Savvy students are thinking about how to get some “real world experience” this summer. You may be thinking that a summer intern would help fill in the gaps when your employees are vacationing with their families, or you may want to use an internship to develop future talent. But before you bring that intern on board, consider whether the job you’re imagining qualifies as an internship, a volunteer position, or a paid position under the Fair Labor Standards Act (FLSA). Misclassifying a position as an exempt internship or a volunteer position can lead to potentially costly wage-and-hour claims against your company or organization. As you think about hiring summer interns, think carefully about whether they should be paid for their work.
In the private sector, if a person works for a for-profit business, she is generally considered an employee whom you must pay in compliance with the FLSA. However, an internship or training program may qualify for an exclusion depending on how the position is designed. The U.S. Department of Labor (DOL) uses the following six-criteria test to decide whether an internship can be unpaid:
1. The internship is similar to training that would be given in an educational environment, even though it includes actual work at the employer’s facility;
2.The internship is for the benefit of the intern;
3. The intern does not displace a regular employee and works under the close supervision of regularly employed staff;
4. The employer providing the training gets no immediate advantage from the activities of the intern, and on occasion, the intern may actually hamper the operations of the business;
5. The intern is not necessarily entitled to a job at the end of the internship; and
6. The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.
See U.S. Dept. of Labor Wage and Hour Div., Fact Sheet #71: Internship Programs under the Fair Labor Standards Act. If all six factors are met, there is no employment relationship under the FLSA, and the employer need not pay the minimum wage or overtime to the intern. However, if even a single factor is not met, the intern must be paid at least minimum wage and time-and-one-half for work in excess of 40 hours in a workweek.
Based on the DOL test, private, for-profit employers must be particularly careful in structuring unpaid internships. Wise practices include:
- Partnering with the unpaid intern’s college in exercising management and implementation of the summer job;
- Ensuring that the intern’s college provides academic credit for the work he does over the summer break;
- Providing the unpaid intern with work on which the company is not dependent. Do not give the intern productive work such as filing, assisting customers, or work in manufacturing the company’s products;
- Do not use unpaid interns to fill-in for vacationing regular employees;
- Do not expressly or implicitly promise a job at the end of an internship;
- Make the internship last for a set number of days or weeks.
Public-Sector and Nonprofit Organizations
People who volunteer time as a public service for public employers and nonprofits like religious, charitable, humanitarian, or educational organizations are generally not covered by the FLSA, and therefore, are exempt from minimum wage laws. An organization may pay no compensation at all or may provide a stipend (e.g., a small amount of money paid for the entire summer, meals, or transportation). To decide whether an intern qualifies as a volunteer for a public employer or nonprofit, the Department of Labor considers the following factors:
- The kind of entity for which the intern is volunteering;
- Compensation of any sort (other than expenses, a nominal fee, and/or reasonable benefits);
- Whether the volunteer expects future benefits from the organization;
- Whether the volunteer displaces a paid employee;
- Whether the volunteer truly offers his or her services freely and is not coerced by the organization; and
- Whether the tasks done by the volunteer are the kind of work that is usually associated with volunteer work.
In short, governmental organizations and nonprofits may engage unpaid interns only if the work they do is like the work a person would do as part of ordinary volunteerism. If the unpaid intern’s job involves work the organization would normally pay someone to do, the intern must be paid according to FLSA requirements.
If the job you are considering giving to a student does not meet the DOL test for your sector, you must pay him or her the minimum wage and time-and-one-half for work performed in any workweek in excess of 40 hours.
If you are unsure how to classify your summer workers, your MSEC representative would be happy to help you make the determination.