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February, 2018

3 Ways The Rules Have Changed For Paid Internships

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3 Ways The Rules Have Changed For Paid Internships

It still may be early in 2018, but now is the time to start thinking about internships. The topic of intern wages is an important conversation to have when drawing out an internship program, particularly whether your company should be offering paid or unpaid internships. However, there are three ways the rules have changed for paid internships:

1. There’s A New Test

Previously, the test for unpaid interns and students consisted of six criteria which all had to be met for these employees to be considered “for-profit.” Now, any for-profit employee must pass the updated “primary beneficiary test” to be compensated for their work. The test allows for courts to evaluate the “economic reality” of an intern-employer relationship and determine who benefits the most:

Paid Internship

If the internship chiefly benefits the employer economically, the intern is entitled to pay.

Unpaid Internship

If the internship is mostly for the educational benefit of the intern, it can be unpaid by the employer.
The seven factors of the new test approved by the Department of Labor (DoL) include:
  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.

2. Flexibility Is Key

The primary beneficiary test is flexible, meaning that it’s not all or nothing. With the rigid old test, employers had to prove all six criteria in order for a position to classify a worker as an intern. Now, if an employer wants to start an internship program, they only have to meet some of the seven new criteria for the participants to be considered interns. It’s important to note that each situation is different, so any inquiries of an intern’s employment status under the FLSA is circumstantial.

3. More Possibilities

With this newfound flexibility in rules, more businesses like nonprofits and media companies can offer internships. In a world where 65% of employers want their entry-level candidates to have at least two or more internships on their resumes, having other industries offer some sort of internship program can help create more qualified candidates across the board. Without so many strict regulations, more organizations can be active in forming and creating internship programs.

No longer are interns glorified coffee-runners, but they are learning valuable skills they will need in their future careers. Employers can lessen their hiring costs if they hire directly from their intern pool, and the interns gain the experience they so desperately need when applying for their first job. After all, about a quarter of internships in the United States turn into full-time job offers. These three changes ensure internships are beneficial not just to the intern, but to the employer - regardless of pay and industry.

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