In The Legal Loop

Summer Internships. . . .to pay or not to pay?

Summer Internships. . . .to pay or not to pay?

by Deena B. Rosendahl, Esq.

With summer approaching, many employers are offering summer internships and the question of “pay” comes up time and time again. Must interns be paid? Are they subject to federal and state minimum wage and overtime requirements?

In order for the requirements of minimum wage and overtime to apply, there must first exist an employment relationship. The key phrase here is “employment relationship”. Are summer interns considered employees?

It is important to establish at the onset if the intern is an employee because all non-exempt employees who perform work for an employer must be paid at least minimum wage for all hours worked and time and a half for all hours worked over 40 in the official workweek. However, individuals who participate in “for-profit” private sector internships may, in certain circumstances, do so without compensation because they may not be actual employees of the company.

The Supreme Court has held that the term “suffer or permit to work” cannot be interpreted so as to make a person whose work serves only his or her own interest an employee of another who provides aid or instruction. This may apply to interns who receive training for their own educational benefit as opposed to for the benefit of the business. The determination of whether an internship meets this exclusion will depend upon all of the facts and circumstances of each such program. The following six criteria must be met in order to make the determination that your intern is not an employee.

  1. The internship, even though it includes actual operation of the facilities of the employer, is similar to training which would be given in an educational environment;
  2. The internship experience is for the benefit of the intern (as opposed to for the benefit of the business);
  3. The intern does not displace regular employees, but rather works under close supervision of existing staff;
  4. The employer that provides the training derives no immediate advantage from the activities of the intern; and on occasion its operations may actually be impeded;
  5. The intern is not necessarily entitled to a job at the conclusion of the internship; and
  6. The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

If these factors are satisfied, an employment relationship does not exist under, and as such, minimum wage and overtime provisions do not apply. Consider the following in determining whether you’ve met these criteria:

Is employment guaranteed or expected at the end of the internship?

Is the internship for fixed a duration which is established at the onset?

Is the internship similar to a classroom learning environment?

Has an employee of the company been displaced as a result of the internship?

Does training and teaching the intern at times impede your operations?

These are all critical questions to answer in determining whether your internship program satisfies the six criteria. For questions on whether your specific internship program satisfies the 6 criteria, call Deena B. Rosendahl, Esq. at 201-947-8855.

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