As summer intern season arrives, companies take on paid and unpaid interns to build their talent pipeline, training and educating potential hires, testing whether potential hires are a good fit, and enhancing their ties to colleges and universities. Interns may offer new perspectives, enhanced and even faster ways of doing things, and a fresh outlook, not to mention an eagerness to learn.

Internship programs can enhance employers’ recruitment and retention efforts, but it’s crucial that HR professionals and supervisors understand the legal obligations that apply to paid and unpaid internships. State and federal laws regulate when interns should be considered employees and therefore entitled to minimum wage, overtime pay, workers’ compensation and other protections.

When making arrangements with an intern, be clear about the start and end date of the internship so that it doesn’t appear to be a permanent job. Internships are typically considered temporary and often last three months in the summer.

The “primary beneficiary test” under the federal Fair Labor Standards Act (FLSA) determines whether a person should be classified as an unpaid intern or a paid employee. These seven factors should be considered under the test:

• Whether the intern and the employer clearly understand that there is no expectation of compensation.
• Whether the internship provides training similar to that which would be given in an educational environment, such as clinical and hands-on training.
• Whether the internship is tied to coursework or the receipt of academic credit.
• Whether the internship accommodates the intern’s academic commitments by corresponding to the academic calendar.
• Whether the internship’s duration is limited to the period in which the internship provides beneficial learning.
• Whether the intern’s work complements, rather than displaces, the work of paid employees.
• Whether the intern and the employer understand there’s no entitlement to a paid job at the conclusion of the internship.

Companies can also choose to pay interns even when they’re not legally required to do so. Internships at private, for-profit organizations must be paid if the employer, rather than the intern, is the primary beneficiary of the program.  Employers should consider whether the work being done by interns is similar to the work that is generally done by paid employees.

It is recommended that employers tailor the duties interns perform to job-shadowing projects, rather than substantive work. Companies should not fill open employee positions with interns. For unpaid interns, meal and rest breaks should be offered as to not alienate those individuals from the paid staff.

For more information on legal compliance of paid and unpaid internships consult your HR Professional at CornerstoneHR.us