As we approach the summer months with temperatures rising and days getting longer, the issue of summer interns gains more interest for both employers and the interns alike. For the interns, they gain experience, training and exposure to the employment industries and real work life. For employers, they gain new help, new ideas and hopefully development of a pipeline for future employees. But one of the biggest problems with regard to summer interns for employers is whether or not the summer intern is a paid or unpaid position. This year, the United States Department of Labor has rejected its old six (6) factor test and replaced it with a new seven (7) factor test which is known as the "Primary Beneficiary Test".
While the new Primary Beneficiary Test is considered as more flexible than the prior test, it also focuses on what can be identified as "economic realities" -- in essence is the employer the primary beneficiary of the work? If so, the intern must be compensated. If, on the other hand, the intern is the primary beneficiary of the relationship, the internship may be unpaid. The following are the seven (7) factors used in the analysis:
- Extent to which the intern and the employer clearly understand that there is no expectation of compensation. If, for example, there is any promise of compensation, (i.e., salary or bonus) either express or implied, the intern will be an employee.
- Extent to which the internship provides training that is similar or comparable to training that would be given in an educational environment.
- Extent to which the internship is tied to the intern's formal educational program by receipt of academic credit for the internship or integrated as part of coursework.
- Extent to which the internship accommodates the internship's academic commitments by corresponding to the academic calendar.
- Extent to which the internship's duration is limited to a defined period of time and which provides the intern with a beneficial learning experience.
- Extent to which the intern work complements, rather than displaces, the work of other paid employees while providing educational benefit to the intern.
- 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.
While the new seven (7) Primary Beneficiary Test is somewhat more flexible than the old six (6) factor test, every internship must be evaluated to assure compliance with Department of Labor rules prior to its commencement.
It is also important that there is an understanding if there may be various state laws or rules that may impact the internship concept. As an aside, there are a number of states that are considering State Legislation aimed at curbing sexual harassment in the workplace. Do these laws impact, in any way, the internship's status? Is intern training required under these laws?
Internships are extremely valuable with regard to "expanding the horizon" of the knowledge of the intern and allowing them a clear understanding of what day-to-day work and obligations are. They are also extremely beneficial to employers because it gives the employer a chance to view the intern not only in the work environment and their work dedication, but also how that intern would fit within the corporate culture if brought on as an employee. Internships are extremely beneficial to both the intern and the employer if handled the right way. It is very important that the relationship with the intern is completely and accurately documented to avoid future problems.
Questions? Contact Attorney Walter Liszka in our Chicago office at (312) 629-9300 or by email at [email protected].