One question that comes up, especially in the summer, is whether interns have to be paid. The Department of Labor (DOL) has issued Fact Sheet 71 to provide employers guidance on this issue.
Summer internships can be extremely beneficial for both the company and the intern. To maximize this relationship and remain compliant with the Fair Labor Standards Act (FLSA), employers must pay attention to what is known as the primary beneficiary test – a standard that defines the intern-employer relationship to determine which party primarily benefits from the relationship.
The Primary Beneficiary Test for interns and students
We wrote more extensively about the DOL guidance when it was issued in 2018, but the factors in the primary beneficiary test essentially relate to compensation and work product expectations, the training and educational opportunities provided, and scheduling.
- Does the intern clearly understand that there is no expectation of compensation?
- Does the intern’s work complement, rather than replace, the work of paid employees?
- Is the internship tied to the intern’s formal education, either through integrated coursework or academic credit?
- Does the internship period correspond to the academic calendar?
This test is flexible, and no single factor is determinative. However, if analysis of these circumstances reveals that an intern or student is actually an employee, then he or she is entitled to both minimum wage and overtime pay under the FLSA.
You can find additional tips for hiring summer interns here. If you need assistance developing an internship program for your business, please call us at 678-208-2802.