Now that Spring is here, many of us who operate businesses may be turning our attention to hiring summer interns. Organizations may hire interns or student trainees year round as well. Regardless of when you take on interns or student trainees, you should be aware of a common legal pitfall in hiring such individuals. That common legal pitfall is whether the intern or trainee must be paid for their services. There are several legal sources to help answer that question.
Fair Labor Standards Act
One law to consider when deciding whether to pay student interns or trainees is the federal Fair Labor Standards Act (FLSA). Generally, the FLSA requires employers to pay employees for their work, including overtime pay and paying employees at least a minimum wage. However, an employer may be able to hire unpaid interns if the employer meets the “primary beneficiary test.” This test looks at the following seven factors to determine whether an intern should be paid in accordance with the FLSA, or if they can work unpaid. The seven factors are:
- The extent to which the intern and the employer clearly understand that there is no expectation of compensation. Any promise of compensation, express or implied, suggests that the intern is an employee—and vice versa.
- The extent to which the internship provides training that would be similar to that which would be given in an educational environment, including the clinical and other hands-on training provided by educational institution
- 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 by corresponding to the academic calendar.
- The extent to which the internship’s duration is limited to the period in which the internship provides the intern with 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.
An employer does not need to meet all of these factors. Whether an employer should pay an intern or student trainee will depend on the unique circumstances of each case. But the more factors you meet, the less likely you will be in violation of the FLSA if you decide not to pay interns or student trainees. The clearer you are as an employer that an internship is not paid and the more likely the internship is more beneficial to the intern than it is to the employer, the greater case you have as an employer to not pay the intern.
If, however, the intern is doing work that an employer would otherwise pay someone to do (i.e., the work is essential to the operation of the clinic and another paid employee would otherwise do the work if not for the intern), the more likely the employer should be paying the intern at least a minimum wage and overtime pay, when applicable. See id.
Don’t Call Interns “Independent Contractors”
One thing that interns or student trainees are not independent contractors. The very definition of an independent contractor is that they are “independent,” meaning they can do their work unsupervised. Organizations hire independent contractors for their expertise, such as in information technology, or accounting, or legal or some other profession. Independent contractors can work for multiple organizations and they pay for their own expenses and usually use their own tools to perform the work of the organization that hired them. To test if someone meets the definition of an independent contractor in Wisconsin, the individual must meet all of the following nine requirements:
- Maintain a separate business
- Obtain a Federal Employer Identification Number and have filed business or self-employment tax returns
- Operate under specific contracts
- Responsible for main expenses
- Satisfactory completion of work or services
- Receive compensation under a contract on a commission, per job, or competitive bid basis
- Realize a profit or suffer a loss
- Recurring business liabilities or obligations
- Relationship of business receipts to expenditures
As one can see from the nine part test, student trainees or interns could not possibly qualify as independent contractors because they require supervision. They are not yet in a position to own and operate their own business; they seek internships to gain experience so that one day perhaps they can become independent contractors in their chosen profession. As a result, psychologists who hire student trainees or interns should not be classifying them as independent contractors. Rather, the correct analysis should be whether the student trainee should be paid or can be unpaid under the FLSA factors identified above.
For further questions or legal assistance, please contact the Center for Health and Wellness Law, LLC.