Looking for a cheaper alternative to paying employees to get the job done? Then perhaps an intern isn’t what you need.
The Department of Labor (DOL) recently updated guidance on how to identify whether an internship truly qualifies to be unpaid. The emphasis isn’t to meet each criterion, but to determine who benefits more from the internship: the employer or the intern. If the employer is the primary beneficiary, then the intern should be paid as an employee, making at least minimum wage and able to earn overtime wages.
How to Determine if an Internship Qualifies as Unpaid
If you’ve hired an unpaid intern, then most (if not all) of the following conditions should exist:
- There is clear understanding from both parties that the intern is not entitled to compensation.
- The internship is similar to training that would be given in an educational environment (including clinical and other hands-on training).
- The intern receives academic credit for the internship.
- The internship accommodates and corresponds with the academic calendar.
- The internship does not extend beyond educating the intern.
- The work of an intern does not replace a paid employee, but instead provides significant educational benefits.
- There is no expectation of a paid job after the internship ends.
The DOL also warns that class credit should not be substituted for wages and that any employer wanting to offer an internship should consult with legal counsel to design and implement an acceptable program.
What are the legal ramifications for misclassifying someone as an unpaid intern?
If an intern were incorrectly classified as “unpaid,” the DOL would require wages be paid retroactively, which would likely include penalties for late payments.
Advice for Employers with Interns
If your company is planning to hire (or already has hired) an intern, consider paying them at least minimum wage. An internship should never be used as a trial period, and all hours worked must still be recorded. If you plan to continue with an unpaid internship, be sure it has a strong educational component that has been coordinated or approved by a school for academic credit, and that you have followed advice from legal counsel.
For more information, please contact our HR experts at HR@stratus.hr.