shared by James Forrest of Michael Best
The Department of Labor has provided guidance to determine whether an intern must be paid (the intern is in fact an employee) or whether it is acceptable to not compensate an intern (i.e., the worker is not classified as an employee). See this link. Factors include:
- Which party is the primary beneficiary (the employer or the worker)? If the worker, then the opportunity is more likely an internship and if the employer is the primary beneficiary, then the worker is more than likely an employee.
- What are the expectations of the parties?
- Does the opportunity provide training that would be similar to that which would be given in an educational environment?
- Is the opportunity integrated into coursework/class credit, and/or academic calendar?
- Is the opportunity limited in duration?
- Does the opportunity complement, rather than displace, the work of paid employees?
Courts have described the “primary beneficiary test” as a flexible test, and no single factor is determinative. Accordingly, whether an intern or student is an employee necessarily depends on the unique circumstances of each case.
- If the worker is an employee, then the employee is most likely entitled to minimum wage, overtime pay, etc. Employees may not volunteer their time or effort to perform the same duties and tasks as their job description.
- State laws may impact this analysis in each jurisdiction.
- There is greater flexibility for public sector, religious and/or non-profit charitable organizations (as opposed to the for-profit sector).
- If the worker is an employee, they should sign standard employment paperwork (including an employment agreement, covering things like confidentiality, intellectual property is owned by the employer, at-will employment, adherence to organizational guidelines, etc.).
- If the worker is an intern, we highly recommend that you have the worker sign an “Internship Agreement”. This is often overlooked. See sample attached. Key substantive topics covered in an agreement like this are listed below.
- Internship is unpaid
- Property owned by organization
- Basic intern representations and warranties (professional behavior and adherence to corporate policies, etc.)
- Intellectual property acknowledgment (IP owned by organization)
- Dispute resolution mechanism
- Release/Waiver of liability by intern