Internship Employment Laws

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 What Is an Internship? Who Is an Intern?

An internship is a specific type of employment arrangement in which the employee gains exposure to an industry or field. Internships are generally temporary in nature, and are viewed as an opportunity to gain entry level experience that can be used to obtain a paying job in the same field. Some internships are paid, and some are not. As such, an intern is the person providing labor under an internship.

Internships frequently take place during school, specifically for high schoolers and college students. They are intended to prepare the intern for their future career. When an internship is well executed, the intern will spend the majority of their time working on relevant projects and making industry connections that will serve them well outside of school. Internships may lead to full time employment offers from the company in which the person is interning.

Internships, especially unpaid internships, become an issue when they are exploitative. Many unpaid internships do not actually allow the intern to gain skills and experience by working on industry specific projects; rather, the intern is treated as free labor. Unpaid internships are considered to be especially problematic in terms of equal access.

Many college students cannot afford to spend time working for no pay, no matter how good the experience is. What this means is that many students who are financially cared for will have access to these internships, and the benefits that come with them, as opposed to other hard working students who could use the experience and connections that the internship would provide.

How Are Interns Paid?

As previously mentioned, internships can be either paid or unpaid. In some cases, an educational institution will offer tuition credits to interns, in lieu of participating in traditional classes. When an intern receives pay, they may be paid hourly; some may instead receive a stipend, which is a set amount of money that they will receive incrementally. Stipends are intended to assist with their expenses, since they are not earning an income to cover their living expenses.

In terms of paid internships, how much an intern can expect to be paid varies widely according to the industry in which they are interning. Tech and finance internships, when paid, tend to pay the highest amount. The National Association of Colleges and Employers (“NACE”) has stated that as of 2017, more than half of graduating seniors were paid for their internship. Undergraduates paid for their internship averaged $18.50 per hour in 2018, while graduates earned slightly more, and doctoral students earned roughly $32.35 per hour.

According to the Fair Labor Standards Act (“FLSA”), internships should be paid. Unpaid internships are considered to be, at least, unethical. In order for an unpaid internship to be considered lawful, the intern must be benefitting from the arrangement more than the company who is using their labor without pay.

Additionally, the Department of Labor has devised a seven-point test which courts have used to determine who is an employee, or paid intern, and who is a legally unpaid intern at a for-profit company. The FLSA has also stated that it is generally acceptable for the public sector and nonprofits to utilize unpaid interns who are providing labor on a volunteer basis, and would not expect compensation for their time anyway.

How Do Internships Differ From Other Employment Arrangements?

Traditional employment involves an employee-employer relationship. A traditional employee is paid a salary, or on an hourly basis, and usually offered benefits in exchange for their labor. Generally speaking, interns are never offered benefits, even those who are paid for their labor.

Additionally, employees generally expect continued employment with their employer, barring circumstances such as company closure or being fired. Interns are aware that their employment is temporary in nature. As such, they will be informed of their end date prior to starting the internship. Finally, employees do not work for an educational benefit, as most interns do.

Another employment arrangement involves an independent contractor and an employer. Employers may hire independent contractors to work on specific projects, or assist with daily business operations. Independent contractors are self-employed and as such they are not considered to be employees of the company. Their labor is offered on a freelance basis. Independent contractors do not receive benefits, and their wages are not taxed as employee and paid internship wages are. The independent contractors themselves are responsible for taxes, as their employers do not withhold any from their paychecks.

What Are Some Common Legal Issues Associated With Internship Employment?

As previously mentioned, internships can be exploitative in nature, especially when they are unpaid. Various legal issues may arise associated with internship employment, but the two most common issues both involve how an employee should be classified.

Whether a worker is considered to be an intern or an employee is one of these issues. Again, the FLSA has provided a list of criteria that should be used to determine whether a person working for a for-profit company should be considered an employee or an intern. This list is referred to as the primary beneficiary test, as it determines who is the recipient of the main benefit of the work. All of these factors must be taken into consideration; however, not all factors must be present for a worker to be classified as an intern instead of an employee.

The following factors would constitute an internship relationship according to the FLSA:

  • Neither party involved expects compensation for the work performed;
  • Neither party expects the position to become a paid job one the temporary work has been completed;
  • The work ceases once the worker has received the expected beneficial learning;
  • The work provides an educational experience, similar to or exceeding what a classroom curriculum would provide;
  • The worker’s academic obligations and calendar are taken into consideration when determining workload and hours;
  • The work performed does not replace that of a full time employee, rather it provides educational benefit to the worker; and
  • The work performed is associated with the person’s current educational program, such as when academic credit is received.

When the worker is considered to be an employee, as opposed to an unpaid intern, they are entitled to minimum wage and overtime pay as designated under the FLSA.

The second issue involves whether a worker is considered to be an intern, or an independent contractor. If this issue is brought to court, the following factors would most likely be considered in order to come to a ruling:

  • How the Individual Was Compensated: If the worker was not compensated, the arrangement would most likely be considered either an internship or volunteer work. If the worker is paid hourly but is not taxed, this would suggest an independent contractor employment arrangement;
  • The Nature of Work and Training: If the work and training is based on the education of the worker, and the employee has no or minimal prior experience in the field, they are most likely working in an internship capacity. The difference is that independent contractors are generally skilled industry experts, or at least are familiar with the type of work involved for that specific job;
  • The Level of Oversight and Instruction On the Part of the Employer: The arrangement will most likely be considered an internship if there is more oversight on the part of the employer. Generally speaking, independent contractors generally have minimal oversight and work remotely. This is due to their experience, and the fact that they do not need as much guidance as a student or new graduate would require; and
  • Oral or Written Agreements Between the Parties: The employment agreement would be considered the most important factor, because it demonstrates the intent of the parties involved in the arrangement.

In order to avoid these issues, an employer should clearly inform the worker as to whether they will be an intern or independent contractor. This will allow for clear expectations, and an opportunity to address any concerns before beginning work for the company.

Do I Need an Attorney For Issues With Internship Employment?

Whether you are an employer or an intern, if any legal issues arise associated with internship employment, you should consult with an experienced and local contract attorney. It is important to work with a local lawyer in order to receive the most relevant legal advice, as these matters can vary from state to state.

If you are an employer, an attorney can ensure that you are not exploiting anyone, and can help you create a clear contract that states whether a person is an intern, an employee, or an independent contractor. If you are an intern, an employment attorney can help protect your legal rights and ensure you are not being taken advantage of. An employment attorney will also be able to represent you in court as needed.


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