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Summer interns – To pay or not to pay

Summer interns – To pay or not to pay

By Michael Burns, courtesy SBAM Approved Partner ASE

As summer approaches and the colleges empty out, many employers may be gearing up for a new batch of summer interns. Though ASE surveys show many employers pay their interns, some intern positions may be set up as unpaid because the work experience is what counts, right?  The Department of Labor has a seven-part test to determine if an internship should be classified paid or unpaid.

Employers seeking to engage un-paid interns should use the following factors to determine if an unpaid internship would be legal or not:

1.      Does the intern and the employer understand there will be no compensation for the services performed?

2.      Does the internship provide training that is comparable to that which would be given in an educational environment? This would include clinical and other hands-on training.

3.      Is the internship tied to the intern’s formal education program through integrated coursework or the receipt of academic credits for doing the internship?

4.      Does the internship accommodate the intern’s academic commitments by corresponding to the school calendar?

5.      Is the internship’s duration limited to the period in which the internship provides the intern beneficial learning?

6.      Does the work the intern is doing complement the work of paid employees rather than displace other employees while providing significant educational benefits?

7.      Is there is an understanding between the intern and the employer that there is not an entitlement to a paid job at the end of the internship?

The new criteria above were released in January of 2018 and followed a different set of criteria published in 2010. The 2010 criteria were much stricter and limited the internships that could legally be unpaid. This resulted in a series of court cases challenging many unpaid internships as a violation of the law.

The 2018 DOL test above is intended to weigh toward the intern being the Primary Beneficiary of the internship and not the employer. The factors are also intended to be applied flexibly whereby no single factor is a determinate. Every factor does not have to be met under these new rules.

The test above is intended to offer more flexibility to employers to not pay interns but at the same time force employers to provide the intern a better learning experience during their internship.  

That said, it is advisable to err on the side of paying interns if the above criteria to an internship program is not clear. In addition to making a proper determination as to whether the internship should be unpaid, employers are advised to develop a written policy stating the intern’s roles and duties. Put this policy (or reference it) in the employee handbook. This is another employment classification that the employee handbook can state in its Employee Classification policy.

The above Department of Labor criteria are federal regulations. Multi-state employers should check whether state or local regulations also may apply. Michigan does not have any law or regulations addressing paid or unpaid internships so federal law should be applied in Michigan.

For more information about the Department of Labor’s Internship rules, click here.

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