Free labor could cost you: an overview of internship wage compliance

As summer approaches, many employers are looking to hire student interns. The benefits of summer internships are mutual: Companies create an accessible group of potential future hires, while interns obtain real-world workplace experience and training, as well as valuable networking opportunities. But many employers may be wondering: Do we have to pay our interns? If so, how much do we have to pay them? And what other issues do we need to consider?

Paid or unpaid? Consult the ‘primary beneficiary’ test

The Fair Labor Standards Act (FLSA) guarantees employees a minimum wage plus an overtime premium for hours over 40 in a workweek.

So, are interns considered “employees” under the Act, making them entitled to minimum wage and overtime? That question must be determined on a case-by-case basis using the “primary beneficiary test.”

The primary beneficiary test is flexible and involves seven nonexclusive factors aimed at determining which party (the employer or the intern) is the “primary beneficiary” of the arrangement. The seven factors to consider are the extent to which: