The IRS has a page that describes how employers should assess whether an employee can be classified as 1099 or W-2:www.irs.gov/businesses/small-businesses-self-employed/independent-contractor-self-employed-or-employee. Key language on this page: In accordance with the requirement that an unpaid internship primarily benefits the intern and not the company. As part of an internship program, a company should provide internship policies and opportunities for an intern to learn about the entire company and not just prepare them for a tight professional function. Interns may seek to participate in multiple internship programs at the same time. Many companies are more involved in recruiting colleges when it comes to hiring interns. However, companies have the right to (1) ensure that their proprietary, confidential and secret business information is not disclosed to other companies, and (2) the intern meets the expectations set by the company. Like any other employee or volunteer, interns must receive sufficient training to meet your expectations. For unpaid interns, and especially for those receiving school loans, the expectation of providing training is increased as the internship program is intended to serve as a complement to face-to-face studies. Despite several recent court cases, it is still legal to hire an unpaid intern. One of the main factors is to understand what distinguishes an employee from an independent contractor. According to SHRM, an internship or internship is intended to provide on-the-job training to a person who has coordinated training in a particular field of work or industry, with an independent contractor being individuals who do not need advice or training to carry out their projects. [1] However, it should be noted that some states apply more worker-friendly tests, so employers should review their state`s practices. And employers need to know that the DOL criteria are being challenged in court.
In Glatt v. Fox Searchlight Pictures, for example, an appeals court ruled in 2015 that the real test of whether an intern can be unpaid is whether the intern is the “primary beneficiary of the relationship.” The main problem with classifying interns as independent contractors is that most working relationships with interns do not resemble IC relationships. When hiring interns, the RSA does not require employers to provide leave to employees, including interns. Some state or local laws require employee interns to receive paid sick leave, depending on the place of work and the length of the internship. Companies should discuss this issue with each intern to determine a reasonable number of hours of work that meet the school`s credit requirements when applying for school loans and are otherwise productive for both the company and the intern. For example, even if it is a paid internship, the company and the intern must establish a schedule that does not interfere with school studies to ensure that the intern can do their best for the company. Many companies employ interns as independent contractors, as this helps them avoid problems with employees such as withholding tax and payroll taxes. The main problem with this is that most internal relationships don`t look like an independent contractor relationship. In addition, there are many resources for employers to decide how to classify an employee in their company. Misclassifying an employee or independent contractor for their specific industry for no reason can result in a fine for the employer in the form of payroll taxes by the Internal Revenue Service (IRS). [2] The RSA states that workers who work more than forty hours per week must be paid for excess hours at one and a half times the normal rate of pay. With an internship program like this, this includes interns who are also considered employees under the RSA.
Certain employees are exempt from this REQUIREMENT of the RSA. In general, it is difficult to determine that a trainee is exempt from overtime because the trainees do not exercise “independent discretion and judgment” in the performance of their work duties, which is the essential prerequisite for the exemption. Most lawyers recommended that articling students be classified as part-time employees. First, some employers still do not pay summer interns. There are few situations where unpaid internships are acceptable, but for most for-profit businesses, these situations do not apply. In general, interns must be paid as regular employees. The Fair Labor Standards Act (FLSA) requires companies to pay their employees a minimum wage (currently $7.25 per hour) and a higher “time and rate and a half” if employees work overtime (more than 40 hours per week). The law also includes rules on youth employment that provide for certain restrictions for workers under the age of 18. The RSA only applies to “employees”, and some companies can prove that their interns are not employees, but only if the internship is related to a trainee`s formal training. Employers often have legal questions about how to hire an intern, especially whether to hire paid or unpaid interns.
When hiring interns, employers should refer to the Federal Fair Labour Standards Act (“FSL”), the Federal Wages and Hours of Work Act, which sets out legal requirements for employee compensation, including paid interns, minimum wage, and overtime pay. In addition, most states, including New York, have their own laws regarding wages, which often closely follow the FLSA. In the federal and state contexts, wage and working time laws apply only to “employees.” Therefore, in order to determine whether an intern is entitled to compensation under the RSA, it is necessary to determine whether the intern is an employee within the meaning of the RSA. In the “for-profit” private sector, it is difficult to determine that an intern is not an employee. The central question of compensation when hiring an intern is whether the internship program primarily benefits the student or the employer. To be considered an unpaid intern, the intern, not the employer, should receive the main benefit of the relationship. Many of the performance and salary requirements (e.g.B, employee bills, source deductions, etc.) for part-time employees are the same as for full-time employees. This means, among other things, that interns classified as part-time employees should be paid by the company`s payroll. While some unpaid internships can provide students with considerable experience and benefits, some violate federal labor laws.
According to the Department of Wages and Hours of Work (DOL), there is a test for interns and unpaid students. .
