In today’s tight labor market, employers may be tempted to offer unpaid internships to high school or college students. Before doing so, employers should carefully evaluate whether such interns legitimately qualify as unpaid.
The U.S. Department of Labor (DOL) and the California Division of Labor Standards Enforcement (DLSE) have traditionally used a long-standing six-part test to determine if the internship should be paid or unpaid.
Recently, however, the DOL and federal courts replaced that test with a seven-factor test to determine which party is the “primary beneficiary” of the relationship. If the employer is deemed the “primary beneficiary,” the internship must be paid.
Although the DSLE continues to refer to the six-part test, there is at least one federal case indicating that California will follow DOL’s new criteria.
These seven factors examine the internship’s “economic reality” to determine which party is the primary beneficiary:
The above “primary beneficiary” test is flexible, meaning no one factor determines the outcome. Thus, each situation must be viewed on a case-by-case basis. If the specific circumstances indicate the intern fits the definition of an employee, then he or she must receive at least minimum wage and any overtime, as well as other employee benefits and rights.
Whether interns are paid or unpaid, California employers must protect them against unlawful harassment and discrimination and provide religious belief and religious accommodation rights. It’s also good idea to add all interns to the employer’s workers’ compensation coverage and, if not, to confirm other insurance coverage for injuries that occur on premises or while engaged in internship tasks/projects.
September 26, 2018Back to Blog
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