Julie R. Pugh & Lee P. Geiger
Many companies and students benefit from the internship relationship, especially in the summer. Interns gain invaluable (#IRL) experience and businesses learn from the ideas and contributions of the interns. My first interaction with an intern is often to ask, “Hey, teach me something that makes me look cool” (see above hashtag).
Historically, for-profit companies pay summer interns. In January, the Department of Labor updated its FLSA Fact Sheet #71, which provides guidance on whether a company’s internship program qualifies an intern or student as an “employee.” The DOL describes a “primary beneficiary test,” which is a fact-specific, flexible analysis of whether an intern or student is an employee. The Fact Sheet identifies seven factors, and while all should be considered, no one factor is determinative. The flexible analysis differs from the prior six-part test that required all criteria to be met in order for the internship to be unpaid. The Courts didn’t like the strictness of the requirements. The DOL revised the test, and the factors considered now are (paraphrased):
- Whether compensation is offered or expected.
- Whether the internship provides training that would be similar to an educational environment, including clinical and hands-on training provided by educational institutions.
- Whether the internship provides academic credit.
- Whether the internship aligns with the academic calendar.
- Whether the company has the internship last as long as the beneficial learning.
- The extent to which the intern’s work complements, rather than displaces, the work of the paid employees while providing significant educational benefits to the intern.
- Whether both parties understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship.
The Fact Sheet and the Courts have evaluated the test and base conclusions on which party is the primary beneficiary of the relationship. If it is the company, the intern should be paid. If the intern benefits the most, it can be unpaid.
The “cool” part of this updated test is that for-profit companies can more easily provide unpaid internships when working with educational institutions to provide students with hands-on training. In this tight labor market, companies can significantly benefit from building relationships with local educational institutions, including high schools, vocational schools, junior colleges, and universities.
But what about our friendly non-profits? Here at Graydon, almost all of us are involved in some sort of non-profit business providing community services (shout out to GCHRA and Cancer Family Care!). Why? Because it’s cool to volunteer. I learn something every time I’m involved. Keep in mind that certain people who volunteer their time, freely and without anticipation of compensation, for religious, charitable, civic or humanitarian purposes to non-profit organizations are also not required to be paid under the FLSA. Super cool law fact – this is why we don’t get paid to volunteer.
Businesses – check with your friendly employment attorney to evaluate whether you must pay your interns. Keep in mind that this post only addresses federal law, and there may be state-specific legislation that could affect the analysis.
Students – look into these #IRL opportunities. You are a valuable asset to any organization, whether you are getting paid or not.
Now, that’s cool!