Douglas Olsen
The classification of student interns as employees is a complex issue that has been the subject of recent lawsuits and enforcement actions under the Fair Labor Standards Act (FLSA). The FLSA mandates a federal minimum wage that employers must pay to anyone classified as an employee, including interns and trainees. The Department of Labor has outlined seven factors to determine whether an intern is considered an employee, including the extent to which there is an expectation of compensation, the similarity of training to an educational environment, and the tie to the intern's formal education program. Unpaid internships in the public sector and certain non-profit charitable organizations are generally permissible, while internships in the private sector are more likely to be viewed as employment. The classification of student interns as employees has legal implications, such as workers' compensation and legal responsibility for the interns' actions. Additionally, factors such as the varying pay rates and structures for interns across industries and locations, as well as the eligibility for benefits after a certain period of employment, further complicate the question of whether student interns are considered employees.
| Characteristics | Values |
|---|---|
| Nature of work | The work should be in the intern's interest and not benefit the employer directly |
| Duration | Should be fixed and established prior |
| Compensation | Unpaid internships are generally permissible in the public sector and for non-profit charitable organizations. Paid internships may be eligible for benefits. |
| Training | Should be similar to what is given in an educational environment |
| Academic credit | Receipt of academic credit may be considered |
| Academic calendar | Internship should accommodate the intern's academic calendar |
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What You'll Learn
Unpaid internships and the Fair Labor Standards Act (FLSA)
Unpaid internships in the public sector and for non-profit charitable organisations where the intern volunteers without expecting compensation are generally permissible. The Fair Labor Standards Act (FLSA) defines "employ" as including the "suffering or permitting of work". Due to this broad definition, internships in the private sector are often viewed as employment unless the internship meets a test of exclusion.
The Department of Labor points to the Supreme Court's holding that the term "suffer or permit to work" cannot be interpreted to classify a person as an employee if their work serves only their interest and not the interest of the business providing them with aid or instruction. Courts have used the "primary beneficiary test" to determine whether an intern or student is an employee under the FLSA. This test allows courts to examine the "economic reality" of the intern-employer relationship to determine which party benefits the most from it.
The following seven factors are considered in the test:
- The extent to which the intern and the employer understand that there is no expectation of compensation. Any promise of compensation suggests that the intern is an employee.
- The extent to which the internship provides training similar to that given in an educational environment, including clinical and other hands-on training.
- 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.
- The extent to which the internship's duration is limited to the period in which the internship provides 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.
If an intern is placed with the expectation that they will be hired on a permanent basis, they are generally considered an employee under the FLSA.
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Internships and workers' compensation
Whether or not student interns are considered employees depends on a variety of factors, including whether they are paid or unpaid, and the nature of their work. Generally, paid interns are considered employees and are covered by a workers' compensation policy. Unpaid interns, on the other hand, may fall into a grey area. While they may sometimes be considered employees, it is not always the case, and the specifics can vary from state to state.
In the United States, the Fair Labor Standards Act (FLSA) defines "employ" broadly as "suffering or permitting work". As such, the Department of Labor emphasizes that internships in the private sector will often be viewed as employment unless they meet specific exclusion criteria. One key criterion is whether the intern's work serves their own interests or the interests of the business. If the former, they may not be considered employees. Additionally, the Department of Labor stresses that unpaid internships should not be used as trial periods for potential future employment, as individuals in such situations would typically be considered employees under the FLSA.
The status of interns for workers' compensation purposes can be complex. While paid interns are generally covered by workers' compensation, the situation is less clear for unpaid interns. In some cases, unpaid interns may be eligible for workers' compensation coverage if their duties and schedule are directly controlled by the employer. However, this can vary across different states and jurisdictions. For example, in New South Wales, volunteers and unpaid work experience students are not considered 'workers' under the Workers Compensation Act 1987, and are therefore not covered by standard workers' compensation policies. Nevertheless, employers still have a 'duty of care' to ensure a safe working environment for interns and volunteers.
To navigate the complexities of interns and workers' compensation, it is advisable for organizations to have written agreements in place that clearly state the intern's role and rights. Such agreements can help protect both the intern and the organization in the event of any disputes or liabilities. Additionally, organizations should ensure that interns are made aware of their rights and responsibilities in the workplace, including any relevant safety procedures and policies. By taking proactive measures, organizations can foster a safe and compliant environment for interns while also mitigating potential risks and liabilities.
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Internship pay and industry standards
Whether interns are considered employees or not depends on the specific circumstances of each case. Paid interns are considered employees and are entitled to at least the minimum wage for all hours worked and overtime pay. In the United States, private-sector employers are almost always required to pay interns, while public-sector employers and non-profit organizations have more flexibility in determining intern compensation.
In Canada, student interns are not considered employees and are not required to be paid under the Canada Labour Code. However, they must be given the same standard hours of work as employees and cannot exceed these hours without approval.
Unpaid internships are generally permissible for public sector and non-profit organizations in the US, as long as the intern volunteers without expecting compensation and receives academic credit. Unpaid interns can perform administrative tasks, but these must provide educational benefits and not replace the work of paid employees.
While paying interns is not always mandatory, it offers several benefits. It can attract a larger and more skilled pool of applicants, increase intern motivation and engagement, enhance the company's reputation, and reduce legal ambiguities and risks.
The rate of pay for interns can vary depending on the industry, location, and level of education required. For example, engineering internships can range from $25 to $26 per hour, while a bachelor's degree-level intern may earn an average of $20.76 per hour. It is recommended that interns be paid at least the highest minimum wage in the country to account for varying living expenses across different locations.
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Internships and academic credit
Whether an intern is considered an employee depends on several factors. The US Department of Labor states that internships in the private sector are typically viewed as employment unless they meet a test of exclusion. This test of exclusion considers whether the intern's work serves their own interests and not the interests of the business.
Internships are often unpaid and are viewed as a way for interns to gain real-life exposure to a career path, earn college credits, and build their resumes. However, there has been growing concern that businesses are using unpaid interns to perform the work of employees without providing the benefits and protections afforded to employees under the Fair Labor Standards Act (FLSA).
To address this concern, the Wage and Hour Division of the Department of Labor has issued criteria to determine whether an intern is a trainee or an employee entitled to minimum wage and overtime pay. Additionally, the Department of Labor emphasizes that unpaid internships should not be used as trial periods for potential employment, as interns in such cases would generally be considered employees under the FLSA.
Now, let's discuss internships and academic credit in 4-6 paragraphs:
Internships can provide valuable experience and academic credit for students pursuing their bachelor's degrees. Academic credit for internships is often offered by community colleges and universities, allowing students to gain practical experience in their field of study. This credit can be obtained through various programs or courses, such as cooperative education programs or field study courses. The number of credits earned may vary, but on average, students can expect to receive around 4 units per semester, with a total of 16 units contributing to their bachelor's degree.
To receive academic credit, internships should meet certain criteria. Firstly, the internship should involve professional work related to the student's career interests or academic major. It should also offer potential career opportunities and help clarify their personal career goals. Supervised by a professional staff member, the internship should have a defined duration, typically lasting 9-13 weeks during the summer, with a commitment of 20 or more hours per week.
Some internships may be mandatory to complete a course or degree program, especially in certain fields like graphic design. In such cases, the internships are usually shorter, ranging from a few weeks to a few months, and may be unpaid to ensure fairness among students. However, it is important to note that the legality of unpaid internships varies by country and sector. For example, in Canada, unpaid internships are permitted if they are required for course credit.
Students seeking academic credit for their internships should refer to their educational institution's guidelines, as criteria may differ between departments. For instance, at Berkeley, students can obtain academic credit through the Independent U.S. Summer Internship Credit Option or at the department level. Departments may offer courses concurrently with internships, which may include reflection and substantial research projects as requirements. Additionally, students should be aware that some employers may require interns to receive academic credit as a form of "payment" due to liability issues.
In conclusion, internships play a significant role in bridging the gap between academic learning and real-world experience. By offering academic credit, educational institutions provide students with a structured framework to gain valuable skills and knowledge while earning progress toward their degrees.
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Interns as a cost-effective solution
Whether interns are considered employees depends on several factors. According to the US Department of Labor, internships in the private sector are typically viewed as employment unless they meet specific exclusion criteria. These criteria include ensuring that the internship is of a fixed duration and that it is not used as a trial period for potential future employment. Unpaid internships are generally permissible in the public sector and for non-profit organisations, as long as there is no expectation of compensation.
Now, let's discuss interns as a cost-effective solution for organisations:
Internships are often viewed as a cost-effective way for organisations to expand their workforce. Firstly, interns can be a source of lower-cost labour. While interns should be fairly compensated for their work, they typically earn less than full-time employees, which helps businesses allocate their resources efficiently. According to CNBC, 60% of interns receive compensation, with an average hourly wage of $20.82.
Secondly, interns bring fresh perspectives and innovative ideas to organisations. Unaffected by existing routines and processes, interns can contribute valuable insights that enhance problem-solving, spark creativity, and drive overall performance. Their enthusiasm and motivation can positively influence teams and foster a culture of continuous improvement.
Thirdly, internships serve as a talent pipeline for future full-time employees. Organisations can identify exceptional interns who exhibit strong performance, work ethic, and cultural fit, and nurture their development. This approach can lead to higher retention rates and lower recruitment costs in the long run. According to the National Association of Colleges and Employers (NACE), 57% of interns transitioned into full-time employees in 2022.
Additionally, internships promote diversity and inclusion within organisations. By recruiting interns from diverse backgrounds and educational institutions, companies can create a more inclusive workplace and benefit from a broader range of perspectives.
Lastly, internships provide a structured process for skill development and career exploration. Interns can gain hands-on experience, build their skills, and make informed career decisions. This benefits both the interns and the organisations, as interns become better prepared for full-time employment and can make more confident choices about their future careers.
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