Minimum Wage? Stipends? Benefits?: Is Your Internship Program Compliant?

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By Evan White
| Employment Our Attorney Network

This post is part of Priori’s new blog series “From Our Network,” where we feature lawyers in our network discussing important issues small businesses face. After every post, we give our readers a chance to ask the lawyer questions, and the lawyer picks 1-2 to answer. In today's post, employment lawyer Evan White answers reader questions about how to ensure your internship program is compliant.

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Dear Readers,

Thank you for your responses to last week’s post discussing unpaid interns. We received some excellent questions regarding creating compliant internship programs.

If I pay interns, do I have to pay minimum wage? Could I pay a stipend which might wind up being less than minimum wage?

Minimum Wage and Interns

You are not legally required to pay your interns at the minimum wage if your internship program complies with all of the factors identified in United States Department of Labor’s (“USDOL”) and New York State Department of Labor’s (“NYSDOL”) tests for unpaid interns (the NYSDOL unpaid internship test will be discussed in an upcoming blog post). If you work in the for-profit sector and your internship program does not comply with these requirements, interns are considered “employees” under the law and they are entitled to receive compensation at the applicable minimum wage.

Stipends and Interns

You may pay a stipend to non-employee interns if your program meets the USDOL and NYSDOL requirements. In this instance though, as a practical matter, an employer must exercise extra caution to ensure that the intern doesn’t misinterpret the stipend as wage compensation for training or services provided. This point is clarified by factor six of the USDOL unpaid intern requirements.

The term “wages” in the context of employment law is a term of art, referring to the remuneration provided to “employees” for their work or services. Factor six only states that interns will not receive “wages” as compensation, but does not bar them from receiving compensation--even monetary compensation--other than wages.

Therefore, you can pay your interns a stipend or an hourly rate that is less than minimum wage , but only if the internship program still fulfills each and every one of the USDOL and NYSDOL requirements.

This brings us to our second question, which is very closely related to the first.

Is an internship paid or unpaid if my company gives interns benefits like housing, meals and/or transportation?

Unpaid interns may be granted benefits without becoming “employees” (and thus becoming subject to minimum wage laws) but only if the benefits granted to interns are different from employee benefits.

So long as your internship program complies with the USDOL and NYSDOL factors, your interns are not considered “employees” and are not subject to minimum wage laws. As noted above, non-employee interns may still be compensated, either via a stipend or through the provision of benefits such as housing or travel, so long as the interns understand (and sign a written agreement to the effect) that that compensation is not wages paid to interns for their work and/or services.

However, as with seemingly everything in employment law, internship providers need to watch out for a wrinkle.

The second New York State Department of Labor factor (which will be discussed in a future post) requires that “trainees or students [must] not receive employee benefits.” As a result, non-employee interns can receive benefits, but they must be different to those provided to employees.

This requirement has been interpreted relatively broadly. It covers benefits that, by their nature, are the type of benefits that an employer typically offers to employees only, such as employee discounts or retirement plans. It also covers employee perks like employer-sponsored trips and getaways as well as free employer-provided goods and services. Therefore, it pays to tread carefully here and ensure that internship benefits differ substantially from employee benefits.

 

Photo Credit: Israel Sundseth via unsplash

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