With the jobless rate for people ages 20 to 24 still higher than 10 percent, many college students might be willing to trade their time for an unpaid learning experience. But there is a legal difference between an employee and an intern. Knowing the difference can help you avoid breaking the law.
Does workers’ compensation apply to interns?
That depends. Some states specifically exclude interns from coverage under their workers’ compensation statutes. In states that are silent on the issue, workers’ compensation boards and courts will often decide an intern’s status based on his/her contributions to the organization. Whether you call workers employees or interns, their duties and what they gain from the position are what matters. If your intern qualifies as an employee, workers’ compensation might apply.
Employee = Paid. Intern = Unpaid (maybe)
So what separates an intern from an employee? A legitimate internship is primarily a learning experience for the intern, not an opportunity for employers to gain cheap or temporary labor. The U.S. Department of Labor lists the circumstances under which an intern can work at a for-profit organization’s internship or training program for no pay:
1 The internship, even though it includes actual operation of the facilities of the employer, is similar to training that would be given in an educational environment;
2 The internship experience is for the benefit of the intern;
3 The intern does not displace regular employees, but works under close supervision of existing staff;
4 The employer that provides the training derives no immediate advantage from the activities of the intern, and on occasion its operations may actually be impeded;
5 The intern is not necessarily entitled to a job at the conclusion of the internship, and
6 The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.
If the internship meets all of the criteria above, an employment relationship does not exist under the Fair Labor Standards Act (FLSA). Unpaid internships in the public sector and for non-profit charitable organizations, where the intern volunteers without expectation of compensation, are generally permissible. Some employers (or schools) pay interns a stipend for living expenses or lodging during their internship. As long as the internship is a training position or otherwise meets the Department of Labor’s standards of a bona fide internship, a stipend will not count as wages and does create an employment relationship.
If your intern is paid minimum wage or more, or if the job is primarily for the benefit of the employer, then beware…your intern could meet the legal definition of employee. The FLSA requires all employees to receive the benefits of employment, including at least minimum wage and other job protections, such as workers’ compensation.
State workers’ compensation laws generally require employers to provide workers’ compensation coverage to any employee. However, if your organization is a nonprofit or governmental department, you might have interns that qualify as volunteers. Workers’ compensation policies automatically cover employees; they might not cover volunteers. Buying volunteer accident coverage would cover a volunteer’s medical expenses if he or she was injured on the job.
Since interns are often young and relatively inexperienced, they have a higher potential for injury. To avoid problems, make sure the education they receive includes basic safety training.
What Other Laws Apply to Interns?
Federal job discrimination laws that apply to employees and job applicants would not apply to individuals whose positions meet the Department of Labor’s criteria for unpaid internships. These people are not considered employees, so federal employment laws would not apply. However, employers should know that some states, including Oregon and New York, have laws that specifically protect interns from job-related harassment and discrimination.
If your paid interns qualify as regular employees, federal and state non-discrimination laws in hiring and supervision will apply. As a matter of good business sense, though, employers should avoid discriminatory actions against unpaid interns as well as employees.
Any employment relationship can create risk exposures. If you have any “nontraditional” employees, such as interns, volunteers or leased employees, make sure you have the appropriate insurance coverage. For more information, please contact us.