Many high school and college students are about to begin their summer internships. Whether the employer is required to compensate them is determined by multiple factors and depends on federal and state law.
Under the Fair Labor Standards Act, any “for-profit” employer must pay employees for their work. The current minimum wage in Virginia is $11 an hour.
The question for the private sector workforce is whether the intern meets the definition of an “employee” who must be compensated. This is because interns or students in the private and “for profit” sector are not defined as “employees” under certain circumstances, and therefore employers need not legally compensate them.
Public sector and nonprofit employers can hire “volunteers.” If employers choose to pay them, the employer must comply with the other requirements of minimum wage and overtime.
The Department of Labor has issued a fact sheet on the circumstances under which a private employer can hire an unpaid intern or student. The decision rests on the “economic reality” of the intern-employer relationship.
There are seven factors identified by courts and the Department of Labor to determine if an intern/student can work uncompensated:
1. The extent to which the intern and the employer clearly understand that there is no expectation of compensation.
2. The extent to which the internship provides training that would be 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.
The test is a flexible one, and no single factor is determinative.
The problem with this analysis is that if the employer is wrong, and fails to properly compensate the intern, then the employer has violated state and federal law and the intern/student would be entitled to back pay, liquidated damages and attorney’s fees.
Because there is some complexity in the analysis, employers should pay their interns at least the minimum wage of $11 an hour. Employers should comply with all the customary requirements of a regular employee, including having the intern record all hours worked in a workweek and compensate the intern at the overtime rate of pay for all hours worked over 40 in a workweek.