Finance News & Insights

It’s almost intern season! Keys to keep your company in compliance

Spring is here and along with new flowers you’ll soon see some new faces around the office. It’s intern time for many companies as college students are out for the summer and look to build their resume.

Of course that’s a slippery slope when it comes to compliance. Recently the feds shifted their policies to determine the status of an internship, replacing the previous six factors employers used to rely on. Here’s how to make sure you don’t accidentally step out of bounds.

Straight from the DOL

The Department of Labor’s most recent Fact Sheet on internships under the FLSA outlines seven factors your company must consider:

  1. The extent to which the intern and the employer clearly understand that there is no expectation of compensation. Any promise of compensation, express or implied, suggests that the intern is an employee—and vice versa.
  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.

Understanding the most important factor

The new criteria depend heavily on the “primary beneficiary” test.

In a nutshell, the test answers one question: Who benefits more from the internship, the employer or the intern?

If it’s your company, then interns must be treated as employees under the FLSA. It’s the intern? Then that standard doesn’t apply.

To make sure you, hiring managers and your finance team understand the primary beneficiary test. It looks at the “economic reality” of the relationship between interns and employers, considering factors such as:

  • the extent to which interns understand they won’t be compensated or receive a paid job after the internship (although beware – paid internships may muddy the waters)
  • whether the intern’s work complements (instead of replaces) the work of paid employees
  • if the internship provides training that’s similar to instruction received in an educational setting
  • whether the intern receives school credits for the internship, and
  • if the internship aligns with the intern’s academic schedule.

Now’s the time – while these internships are being set up and finalized – to hammer out all these issues so you’re confident your company remains in compliance with what DOL expects and you don’t end up with any expensive surprises down the road.

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