Intern vs Employee

Reprinted from PERSONNEL LEGAL ALERT, a widely read employment law newsletter that keeps HR executives up-to-date on the latest court cases, legal trends, government regulations, and federal legislation that affect the policies you write and procedures you administer.

What would you do if a student looking for real-world experience knocked on your door and offered to work for free? It may be tempting in these tough economic times to utilize interns. If you go down that road, you must be careful not to establish an employer-employee relationship; otherwise, failing to pay will create a world of wage and hour trouble for your company.

The Department of Labor uses six criteria to determine whether an intern is an employee. An intern is not an employee if the following criteria apply.

  1. The training is similar to that which would be given in a vocational school. An unpaid internship is the practical application of what the student would be learning in school, said Jay Zweig, a partner in Bryan Cave's Phoenix area office. Think of it as supplementing classroom study with on-the-job study.
  2. The training is for the benefit of the student. What's most important in an unpaid internship is that the student takes away a skill; it is not generating revenue, said Zweig. The student's primary goal "isn't to produce a work product sold to customers."
  3. The student does not displace regular employees, and works under close supervision. According to Zweig, suspicions that an unpaid intern is really an employee are raised when the student performs tasks that are primarily clerical in nature and are normally handled by a lower-level employee. Exception: A small office where all employees normally rotate jobs and at some point perform clerical work.
  4. The employer that provides the training derives no immediate advantage from the activities of the student, and on occasion, its operations may actually be impeded. "This is a pretty critical one," noted Zweig. He offered the example of a student shadowing an employer, asking questions about why things are done the way they are, etc. "You're taking the time to explain thought processes and business strategies — things that are intuitive [to you]. Your efficiency is interrupted."
  5. The student is not necessarily entitled to a job at the conclusion of the training period.
  6. The employer and the student understand that the student is not entitled to wages for the time spent in training. "There is no classification called a 'paid intern,'" said Zweig. "You're either an employee or an unpaid intern." Where an employer-employee relationship exists, a student must be paid at least minimum wage and any overtime earned. If the student is under the age of 18, child labor laws may apply.

Zweig recommended "having something in writing" to drive home points #5 and #6. His suggestion: Give an offer letter to the student prior to the start of the unpaid internship that unequivocally states that they understand that they are not entitled to a job or to wages. "Have the intern sign [the letter] and return it to you."