As a business owner, you may be considering starting an internship program for your company. Internships can be beneficial to both you as a business owner and the intern. Interns can receive hands-on training in their field of interest while assisting your company in reaching its goals. However, it is important to keep in mind the various legal considerations and requirements associated with this specific type of hire.
There are often misconceptions about the purpose of and methods used in running an internship program. Some businesses approach internships as opportunities to obtain unpaid labor while failing to properly structure these internships in ways that actually help the interns involved. When designing your program, consider the following questions.
- What is the timeline for your internship program?
- How will interns interact with your employees?
- What types of work will interns be responsible for and how will this work help them learn?
- What are the applicable state and federal regulations?
- Will your program collaborate with existing educational clinics or training programs?
- How will you select your interns?
- Will you compensate your interns?
When it comes to the compensation of interns, it is common for many programs to deviate from federal law requirements, particularly when they choose to implement unpaid internship programs. Unbeknownst to many, interns may qualify as employees under the Fair Labor Standards Act (FLSA) and may consequently be entitled to the same minimum wage and overtime standards that apply to workers. The “primary beneficiary test” is the predominant analysis courts use to determine whether an intern is considered an employee for FLSA purposes.
Primary Beneficiary Test Factors
Generally, the primary beneficiary test examines to what extent the internship benefits an intern. Although there is no hard and fast rule regarding this test, courts consider the following seven factors when assessing whether an intern should be classified as an employee for FLSA purposes.
- The degree to which the business and intern have discussed compensation. More specifically, courts consider whether compensation has been promised or implied. The existence of such a discussion suggests an employer-employee relationship.
- How comparable the training an intern receives is to that of a hands-on or clinical education program.
- Whether the program is connected to an academic institution or formalized educational program and to what extent an intern receives academic credit.
- How accommodating the internship is to the academic program or calendar the intern may be committed to.
- The duration of the program.
- Whether the intern's labor replaces or supplements paid employees while still providing educational advantages to the intern.
- The existence or nonexistence of paid employment at the end of the internship period.
NOTE: There are some exceptions to the applicability of the primary beneficiary test when considering nonprofit and charitable organizations. The internship may be exempt from this standard and thus unpaid if the internship is with a governmental organization or one comprised mostly of volunteers.
If you are in the process of developing an internship program, we can help you comply with local and federal regulations while building an internship program that meets your specific business needs. Schedule an appointment with our office today.
 U.S. Dep't of Labor, Wage & Hour Div., Fact Sheet #71: Internship Programs Under the Fair Labor Standards Act (Jan. 2018), https://www.dol.gov/agencies/whd/fact-sheets/71-flsa-internships.