The Internship Balance: Value for Interns or a Boost for Businesses?

When your company is ready to assert itself as a leader in the industry, it makes sense to influence its future through mentorship. Hiring an intern is one of the most effective ways a company can give back to the community and also have the opportunity to vet talented newcomers with little risk. One question inevitably arises in these situations: do you have to pay interns? The answer to this question is not a simple yes or no; it depends on various factors and legal regulations. Under the Fair Labor Standards Act (FLSA), employers are generally required to pay minimum wage and overtime to all employees, including interns. However, some exemptions and guidelines can determine whether an intern must be compensated for their work.

The Primary Beneficiary Test

One key exemption is known as the “primary beneficiary test.” According to this test, interns do not necessarily have to be paid if they are the primary beneficiaries of the internship. In other words, if the internship primarily provides valuable learning experiences and benefits the intern’s education, and the employer does not significantly profit from their work, compensation may not be required.

Internships as Part of Educational Programs

Another exemption relates to internships that are part of an educational program. For instance, if an intern is enrolled in a college course that mandates an internship as part of the curriculum, they may not need to receive payment for their work.

However, it is crucial to understand that the FLSA sets stringent guidelines for unpaid internships, and different jurisdictions may have additional requirements. Failure to meet all of these requirements could result in interns being classified as employees, entitled to minimum wage and overtime.

Noteworthy Cases

Some legal cases in the 11th Circuit Court of Appeals shed light on this issue. In 2014, the court ruled that NBC interns were entitled to minimum wage and overtime pay. The basis of this decision was the significant benefit the interns provided to NBC, and the fact that their internship was not primarily educational. The key takeaway from this case is that employers cannot simply label an internship as “unpaid” to avoid compensation. If an intern’s contributions to the employer are on par with what an employee provides, they must be compensated.

In another case, an intern was not required to be paid under the FLSA because it was an educational training program through a public agency. Due to a complicated decades-old law, the agency wasn’t able to officially claim whether the intern was a “volunteer” or an “intern.” The court reached a decision stating that while government or public agencies can’t rely on the primary beneficiary test to decide if an intern should receive payment, they presented evidence showing the intern had clearly acknowledged understanding the role was unpaid. Consequently, the court sided with the defendant.

The Takeaway

When employers ponder whether to pay interns, they should focus on the internship’s compensation aspect. Are the interns delivering valuable services to the employer? Are they reaping significant benefits from the internship? If both these questions warrant a positive response, then compensation for interns is typically warranted.

At Agenzia, we understand the complexities of internships and employment law. Our commitment is to protect businesses while ensuring fairness in their treatment of interns. As an advocate for businesses, we want to help facilitate the legal flexibility to make internship decisions without fear of fines or regulatory complications.

To discuss your specific situation and make informed choices, call Chris Butler with Agenzia today and schedule a consultation. Your business and interns deserve fair and lawful treatment, and we are here to assist you every step of the way.