Determining an Unpaid Intern
Compliance | Jun 10, 2021
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The Fair Labor Standards Act (FLSA) requires for-profit employers to compensate employees. In turn, employees are entitled to a minimum wage and overtime pay.
An exception is if the individual is considered an intern rather than an employee. The FLSA does not require employers to pay interns for their time and work completed. To determine if an individual is an unpaid intern, employers should use the “primary beneficiary test.”
Essentially, this test consists of seven guidelines to determine who benefits most from the relationship – the intern or the employer. It is important to note that this test is not a regulation. Rather, it is general information that the courts have used to determine the true relationship between the employer and the intern.
The “primary beneficiary test” looks at the following seven factors:
1. No Expectations
Both the employer and the intern clearly understand that there is no expectation of compensation. If there is either an implied or explicit promise of compensation, then the intern is considered an employee and falls under the FLSA.
The training that the intern receives should be similar to what that individual would get in an educational environment.
The work that the internship covers should be tied to the intern’s education either through integrated coursework or the receipt of academic credit.
The internship should accommodate the intern’s academic commitments. Effectively, "work" should not get in the way of "school."
The internship should last only for as long as the intern is receiving beneficial learning.
The intern’s work should complement those of paid employees while still providing significant educational benefits. The internship should never displace the work of a paid employee.
7. No Promises
Both the intern and the employer should understand that the internship is not a promise for a paid job once the internship concludes.
The "primary beneficiary test" is considered a flexible test. In other words, no single factor determines whether an individual is an unpaid intern or an employee. Ultimately, each situation is unique and should be evaluated on its own.
In addition, this “primary beneficiary test” only considers internships as it relates to the FLSA. Even though an individual may be considered an “unpaid intern” as it concerns the FLSA, that may not apply at the state or local level. Different jurisdictions may have their own requirements or regulations that employers must follow.