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Interns and Trainees
Q. What requirements do we have to meet as an employer in order to have a student come to our workplace as an unpaid intern?

A. Certain interns are not considered employees if they work primarily for their own benefit on the premises of another and without any express or implied compensation agreement. Often, the arrangement is one in which a student intern earns high school or college credit in exchange for participating in a training program conducted by the employer. While the U.S. Department of Labor had adopted a six-part test for evaluating whether an unpaid intern is actually an employee, federal circuit courts have recently criticized this test, including the 9th Circuit Court of Appeals, which covers all of the western United States, including Oregon. Benjamin v. B & H Education, F.3d, No. 15-17147, 2017 WL 6460087 (December 19, 2017). These courts have used a seven-part test for internships known as the “primary beneficiary test,” which includes some of the factors in the U.S. Department of Labor’s old six-part test and some new ones as well. On January 5, 2018, the U.S. Department of Labor updated its guidance materials pertaining to internship programs to reflect the factors identified by the courts in the “primary beneficiary test,” which are as follows:
 
Criteria for Interns
  • The training, even though it includes actual operation of the facilities of the employer, is similar to that which would be given in an educational environment;
  • The extent to which the training is tied to a formal education program with integrated coursework and academic credit;
  • The extent to which the program accommodates academic commitments by corresponding to the academic calendar;
  • The extent to which the internship’s duration is limited to the period of beneficial learning;
  • The extent to which the internship complements rather than displaces the work of paid employees while providing significant educational benefits;
  • The interns are not necessarily entitled to a job at the conclusion of the training period; and
  • The employer and the intern understand that the intern is not entitled to compensation for the time spent in training.
The courts have considered the factors described above, with no single factor being determinative, to evaluate whether an intern is, in fact, an employee under the federal Fair Labor Standards Act (FLSA). If consideration of these factors demonstrates that the intern is employed, the requirements of the wage and hour laws will apply.
 
Q If we bring in a student under the age of 18 as an intern, do we have to obtain an employment certificate and follow other child labor laws?
 
A. Not if, upon application of the criteria described above, the individual is not an employee.

Q. What makes a student an employee as opposed to an intern?

A. Interns are generally considered employees and their work covered by the FLSA if:
  • They provide essential services to the employer;
  • They are working in a position where someone is normally paid;
  • There is a history of paying someone to do the same or similar work;
  • Other people are currently paid for the same or similar work; or
  • There is no corresponding academic program with academic credit.
Under wage and hour law, to "employ" an individual is to "suffer or permit" the individual to perform work. However, the courts have ruled that this definition does not necessarily make everyone who performs work for another an employee. For example, those who work without any express or implied compensation agreement may work primarily for their own benefit on the premises of another. The exemptions for this sort of relationship are narrowly defined and usually apply only to student learners or in-school placements. 
  
Whether, under the FLSA, students are employees depends on their activities on the premises of the employer. The following circumstances suggest that an employment relationship does not exist:
  • The intern receives ongoing instruction at the employer´s work site and receives close on-site supervision throughout the learning experience, with the result that any productive work that the intern performs is offset by the burden to the employer from the training and supervision provided. 
  • The placement of the intern at a work site during the learning experience does not result in the displacement of any regular employee. In other words, the presence of the intern at the work site does not result in an employee being laid off, does not result in the employer not hiring an employee it would otherwise hire, and does not result in employees working fewer hours than they would otherwise work. 
  • The intern is not entitled to a job at the completion of the learning experience, but this does not mean that employers are to be discouraged from offering employment to interns who successfully complete the training. 
  • The employer, intern, and parent or guardian (if the intern is a minor) understand that the intern is not entitled to wages or other compensation for the time spent in the learning experience, although the intern may be paid a stipend for expenses such as books or tools.
  • The training closely corresponds to a program of academic instruction and the school calendar, and the training program does not last longer than the period of beneficial instruction. In the Benjamin case cited above, the program ended once the students earned enough training hours to obtain their cosmetology licenses.
The wage and hour regulations, including child labor rules, only apply when a student is employed by an employer. 
  
Tip: Labeling a work site experience "internship," "mentorship," or "structured work-based learning," has absolutely no impact on whether or not there is an employment relationship. If the above criteria are met, the intern is not an employee and the experience qualifies as an unpaid internship rather than employment. If, on the other hand, the above criteria are not met, the intern would most likely be an employee and must be paid–even if the experience is promoted or labeled as an "unpaid internship." Even though the federal guidance has used the term “trainee” to describe unpaid interns, we have chosen to refrain from using that term because it has the potential to confuse employers and result in on-the-job training being mistakenly unpaid.
  
If, at any time, while an intern participates in a learning program the employer also employs the person, it is likely that all of the person’s activities for the employer will be considered to be employment. That is, a student may not be a participant in such a program during school hours, perform similar work as an employee for the same employer after school hours, and resume participation in the program the next day. Likewise, a student may not be an "intern" during the school year, become a paid employee during the summer, and revert back to "intern" status when school begins.
 
Updated February, 2018

DISCLAIMER 
Nothing on this website is intended as legal advice.  Any responses to specific questions are based on the facts as we understand them, and not intended to apply to any other situations.  This communication is not an agency order.  If you need legal advice, please consult an attorney.  We attempt to update the information on this website as soon as practicable following changes or developments in the laws and rules affecting Oregon employers, but we make no warranties or representations, express or implied, about whether the information provided is current.  We urge you to check the applicable statutes and administrative rules yourself and to consult with legal counsel prior to taking action that may invoke employee rights or employer responsibilities or omitting to act when required by law to act.
 
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