To Pay an Intern or Not to Pay?

That is the question many employers face.

Interns are great options for small businesses that need extra help but do not have the funding to bring a full-time employee on staff. Should you pay your interns or not? Thanks to the Department of Labor (DOL), that question is now answered for you.

Recently, the DOL announced tips that reverse their previous test to determine whether an intern or student is considered an actual employee under the Fair Labor Standards Act. The new test is similar to the “primary beneficiary” test used by federal appellate courts.

The Primary Beneficiary Test
This test is used to determine whether or not an intern or student is considered an employee under FLSA. Seven factors are included in this test, outlined by the Wage and Hour Division.

1. The extent to which the employer and intern clearly understand that there is no expectation of compensation. If any promise of compensation is given, the intern is then an employee and vice versa.
2. The extent to which an internship offers training similar to any training that is given to a student in an educational environment.
3. The extent to which an internship is tied to the formal education program of an intern by coursework or if the intern is given academic credit in return.
4. The extent to which an internship accommodates the academic commitments of an intern, according to the academic calendar.
5. The extent to which the length of an internship is limited to a period that provides beneficial learning.
6. The extent to which an intern’s work complements but does not displace the work of paid employees while still providing educational benefits to the intern.
7. The extent to which an intern and an employer understand that the internship position is offered without entitlement to give a paid job offer once the internship has been completed.

Once the test is completed, if a student’s work actually falls under that of an employee, he is then entitled to minimum wage and overtime pay under the FLSA. If the analysis does not show that he is an employee, overtime and minimum wage pay does not apply under the FLSA.

The test can be found here.