When employers bring onboard interns, the question “to pay or not to pay” often arises. The US Department of Labor provides guidance on this question with Fact Sheet #71, which provides a 7-factor test to determine whether an internship may be unpaid.
The following seven factors should be considered and weighed:
- The extent to which 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.
- The extent to which the internship provides training is similar to that given in an educational environment, including the clinical and other hands-on training provided by educational institutions.
- The extent to which the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit.
- The extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic calendar.
- The extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning.
- The extent to which the intern’s work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern.
- The extent to which the intern and the employer understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship.
Keep in mind that no single factor is determinative. Evaluate each internship position on a case-by-case basis. Also, this criterion is federal; applicable state or local regulations may provide additional guidance or greater protections.
If an internship is paid, the worker is an employee, and all minimum wage and overtime requirements must be met.
If the intern is an employee, it’s also important to understand their benefits eligibility. Discuss your health and retirement plan requirements with your broker. Check your company-provided benefit policies to determine eligibility for those plans.
Another frequent question from employers is: how do we handle “hiring” or “onboarding” interns? It is important that since many of the same liabilities arise with interns as with employees, you don’t disregard a formal orientation process to include training on many of the same areas as regular staff: confidentiality, safety, discrimination, and harassment. It is helpful to have an intern agreement outlining pay information and applicable benefits and explicitly clarifying their status at the organization.
For more information on administering internship programs, contact the Catapult HR Advice Team.
Written by a Catapult HR Advisor