With the onslaught of summer, a common question that may arise for your business is the proper classification under Fair Labor Standards Act (FLSA) of an “intern” or a “student worker” receiving training in your business. As you are probably aware, the FLSA requires that most employees be paid at least the federal minimum wage and overtime pay of time and one-half the regular rate for all hours worked over 40 hours in a workweek; however certain individuals are exempt from these requirements. If an employee is not exempt, an employer may, on its own initiative or under a collective bargaining agreement, provide a higher wage, shorter workweek, or higher overtime premium than required by the FLSA.
In order for an exemption to apply to an employee, an employee’s specific job duties and salary must meet all the requirements of the Department of Labor’s (DOL) regulations. Job titles do not determine exempt status. Exempt classifications include executives, administrative positions, professionals, outside sales employees, certain computer employees and potentially interns.
Specifically, with regard to an intern, an intern’s classification under the FLSA depends on the structure of the internship.
- Is the internship structured around a classroom or more like an academic experience (i.e., a job shadowing opportunity that allows an intern to learn certain functions under the close and constant supervision of a regular employee, while performing no or minimal work)?
- Or, is the intern engaged in the regular business operations and performing productive work for the employer (i.e., filing, performing other clerical work, or assisting customers)?
The Department of Labor issued a six factor test to help employers assess whether an intern is an employee subject to the wage and hour requirement of the FLSA. Generally, interns in the “for-profit” private sector qualify as employees under the FLSA and must be paid at least minimum wage and overtime.
If, and only if, all of the following six factors are met, can an employer offer an internship not paying minimum wage and compensation for overtime:
- 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;
- The internship experience is for the benefit of the intern;
- The intern does not displace regular employees, but works under close supervision of existing staff;
- 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;
- The intern is not necessarily entitled to a job at the conclusion of the internship; and
- The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.
INSIGHTS FOR EMPLOYERS
- The internship should be for a fixed period of time, which is established prior to the start of the internship.
- If the “internship” is being used as a trial period to see if the person would be a good permanent employee, the intern should be paid at least minimum wage and compensated for overtime.
- If the intern is being used as a substitute for a regular worker or to augment its existing workforce during specific time period (i.e., busy season), the intern should be paid at least minimum wage and compensated for overtime.