Do I have to pay my summer intern?

Like most answers to legal questions, it depends.  

For-Profit Employers
If you are a for-profit employer, the answer will usually be “yes.” The Fair Labor Standards Act (FLSA) requires covered employers to pay their employees minimum wage and overtime for hours worked over a 40-hour week if the employee is non-exempt. Thus, if the intern is considered an “employee,” the intern must be paid in accordance with the FLSA.

In 2018, the Department of Labor (DOL) released an updated primary beneficiary test used to determine whether an intern qualifies as an employee. This test sets forth a set of factors aimed at determining whether the intern or the employer is the primary beneficiary of the intern’s services.

The following seven factors, according to the DOL Fact Sheet, are used to determine whether an intern is an employee: 

1. 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.
2. The extent to which the internship provides training similar to that which would be given in an educational environment, including the clinical and other hands-on training provided by educational institutions.
3. The extent to which the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit.
4. The extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic calendar.
5. The extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning.
6. 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.
7. 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.

However, this test is often hard for employers to apply because no one factor is determinative, and DOL has emphasized that determining whether an intern is an employee depends on the unique circumstances of each case. In light of this uncertainty, most for-profit employers will choose to pay their interns. Misclassifying an employee as an intern could result in costly litigation, a DOL investigation, and unflattering publicity, if an intern were to later claim they were entitled to compensation.

For-profit employers can also develop a school-to-work program under the FLSA, which provides students with a planned job training program. Students working as a part of a school-to-work program are not considered employees under the FLSA. However, the school-to-work program must also meet the Primary Beneficiary Test discussed above.

Public and Non-Profit Employers
If you are a public or non-profit employer, you may not have to pay your intern. This depends on whether the intern would qualify as a “volunteer” under the FLSA.

The FLSA defines a volunteer as “[a]n individual who performs hours of service for a public agency for civic, charitable, or humanitarian reasons, without promise, expectation or receipt of compensation for services rendered . . . .” A public agency is defined as a state, a political subdivision of a state, or an interstate governmental agency.

Further guidance from DOL states that individuals who volunteer their time to religious, charitable, civic, humanitarian, or similar non-profit organizations as a public service are not covered by the FLSA, as long as they:

1. Do not expect to receive compensation,
2. They typically serve on a part-time basis, and
3. Do not displace regular employed workers or perform work that would otherwise be performed by regular employees.

Volunteers may be paid expenses, reasonable benefits, a nominal fee, or any combination thereof for their service without losing their status as volunteers. Individuals do not lose their volunteer status if they receive a nominal fee as long as it is not tied to hours or services provided and is not too high of a payment.

However, the FLSA makes it clear that employees may not volunteer services to for-profit employers. Furthermore, any time spent working for public or charitable purposes at the employer’s request, under the employer’s direction or control, or on work premises is working time for which the employee must be compensated.

In addition to federal employment laws, some states have stringent laws that govern paying interns, including New York and California. Your company will also want to ensure that it is in compliance with federal and state laws regarding the employment of minors.

For more information on this topic or other employment law matters, please contact Katie or a member of the HSB Employment Law practice team.