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Intern or Employee? Understanding the Primary Beneficiary Test

It’s summer and, for interns, it is time to start working on finding the perfect internship opportunity. But a question that often comes up for employers is whether they have to pay their interns? Even though many interns are willing to work for free in order to gain invaluable experience in their desired profession, including the significant networking opportunities they can have, employers may still be on the hook for paying wages. So, how do you determine whether an intern must be paid for their work?

Intern or Employee?

Whether an employer is required to pay an intern minimum wage for their work depends on whether the intern is legally considered an “employee.” This is particularly important when an employer is a “for profit” business. In making this legal determination, courts employ what is known as the “primary beneficiary test.” Under the “primary beneficiary test,” courts consider the “economic reality” of the intern-employer relationship to decide whether the employer or the so-called intern is the “primary beneficiary” of the relationship. When it is determined that the intern is not the primary beneficiary, then the employer is required to pay the intern as an employee.

Factors to Consider in the Primary Beneficiary Test

There are essentially seven factors that courts typically consider when employing the primary beneficiary test. First, they look at the extent to which the employer and the intern both clearly understand that there is no expectation of compensation. If there is any promise that the intern will be compensated, whether express or implied, then the intern is more likely an employee. Another consideration is whether the work done by the intern complements rather than replaces the work of a paid employee. Courts also consider the understanding between the employer and the intern that a paid job is not guaranteed when the internship is completed.

The academic nature of the relationship is very important. If the internship provides the type of training that would be provided in an educational environment, such as clinical or hands-on training that can be obtained at an educational institution, then the relationship is more akin to an internship. The same is true if the internship includes integrated coursework or academic credit associated with the intern’s formal education program. Also significant is the extent to which the arrangement accommodates the intern’s school commitments or corresponds to the academic calendar, or if the internship is limited in duration to the period in which the internship continues to provide the intern with beneficial learning.

The Court’s Test is Flexible

The “primary beneficiary test” is considered a flexible test, which means that no one factor is determinative. Instead, courts weigh the specific circumstances of each internship to determine whether the person should legally be considered an unpaid intern or a paid employee. If the factual analysis demonstrates that the individual is, in fact, an employee, that person is entitled to both minimum wage and overtime pay under the FLSA.

If you feel you have been the victim of discrimination or retaliation in the workplace, or if you have any other questions regarding your employment rights, please contact the experienced Birmingham employment law attorneys at Wrady Michel & King . You can contact us either online or by calling us at (205) 265-1880. We are here to serve you!