Summer is fast approaching, and with it, the summer internship season. For small business owners, hiring interns can offer opportunities to increase capacity, especially during periods of growth. Employers however must be aware of and comply with all laws and regulations applicable to their workplaces. Below are some things to consider before hire an intern.
1. WHAT IS AN “INTERN” AND HOW ARE THEY DIFFERENT FROM AN “EMPLOYEE?”
An employee is hired to perform a particular work function for the benefit of an employer. Internships, in contrast, are expected to provide practical work experience and insight into an intern’s education and must primarily benefit the intern.1 Laws and regulations at the federal, state, and local levels establish employer responsibilities and workers’ rights in employer-employee and employer-intern relationships. 2
Independent of the terminology used and of whether or not a contract is signed, an intern could in fact be considered an employee depending on practical realities of the employer-intern relationship. There is no hard and fast single rule for establishing such a relationship. If the employer was ever involved in a lawsuit related to the treatment of an intern, a court would consider several factors to determine who was the “primary beneficiary” of the relationship (discussed below). Interns, whether paid or unpaid, should always be the primary beneficiary of an employer-intern relationship, including where the employer is a small business.
2. ARE FOR-PROFIT EMPLOYERS REQUIRED TO PAY INTERNS IN NEW YORK?
Unpaid internships and internships paid below minimum wage are only lawful if the primary benefit is educational training. To qualify as an internship, the employer-intern relationship must meet all eleven factors4 in the New York State Minimum Wage Act. This test is stringent and small businesses are encouraged to sign an unpaid internship agreement to help ensure their compliance with such requirements.
The eleven factors that help determine whether an internship is in fact an internship are the following:
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The training, even though it includes actual operation of the facilities of the employer, is similar to training that would be given in an educational environment.
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The training is for the benefit of the intern.
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The intern does not displace regular employees, but works under close supervision.
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The activities of the trainees or students do not provide an immediate advantage to the employer. On occasion, operations may actually be impeded.
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The intern is not necessarily entitled to a job at the conclusion of the internship and are free to take jobs elsewhere in the same field.
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The trainees or students are notified, in writing, that they will not receive any wages and are not considered employees for minimum wage purposes.
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Any clinical training is performed under the supervision and direction of people who are knowledgeable and experienced in the activity.
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The trainees or students do not receive employee benefits.
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The training is general, and qualifies trainees or students to work in any similar business. It is not designed specifically for a job with the employer that offers the program.
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The screening process for the internship program is not the same as for the employment, and does not appear to be for that purpose. The screening only uses criteria relevant for admission to an independent educational program.
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Advertisements, postings, or solicitations for the program clearly discuss education or training, rather than employment, although employers may indicate that qualified graduates may be considered for employment.
If the internship does not satisfy the above factors, the intern is considered an employee for payment and other legal purposes and must be paid minimum wage. The minimum wage requirement is $15 per hour in New York City, $14 per hour in Nassau, Suffolk and Westchester counties, and $12.50 per hour in the rest of the state.5 Interns who work more than forty hours a week must be paid for the excess hours at 1.5 times the regular rate of payment. 6
3. WHAT ARE SPECIAL CONSIDERATIONS FOR HIRING FOREIGN INDIVIDUALS AS INTERNS?
U.S. employers should be aware of the visa requirements in hiring foreign individuals as interns. Student interns require either the F-1 or J-1 visas. Under both these visas, the internship must relate to the student’s academic program.
F-1 visa students are currently enrolled in or graduated from an U.S. school. International students must go through the Curricular Practical Training (CPT)7 for current students or Optional Practical Training (OPT)8 for recent graduates to obtain legal authorization to intern, whether paid or unpaid.
J-1 visa students are currently enrolled in or graduated from foreign schools. The J-1 visa is meant for students who need practical training that is not available to them in their home county. Such training must be directly related to their academic program.9
Non-student interns are subject to other visas such as the H-1B10 or TN11 visas, which carry additional requirements. It is critical that employers confirm a foreign individual’s work authorization to help avoid liability.
When working with interns, small business owners take on a responsibility to ensure the proper treatment of their interns under applicable laws. The employers must be aware of and understand requirements at the federal, state and local levels to structure legally sound internship opportunities. When in doubt, they should consult employment lawyers including for guidance around relevant issues not addressed in this introductory fact sheet (considerations such as workers’ compensation12 and liability insurance, for instance). For further educational resources on employment law issues in New York, click here to access Start Small Think Big’s Employment Law Essentials for Small Business Owners webinar series.
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1 Definition at a federal level see USDOL Fact Sheet #71, available at: https://www.dol.gov/sites/dolgov/files/WHD/legacy/files/whdfs71.pdf; definition in New York State mirrors federal definition, see NYSHRL § 296-c, available at: https://dhr.ny.gov/sites/default/files/pdf/296-c.pdf.
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2 29 U.S.C. § 203(e), available at: https://www.law.cornell.edu/uscode/text/29/203
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3 USDOL Fact Sheet #71, available at: https://www.dol.gov/sites/dolgov/files/WHD/legacy/files/whdfs71.pdf
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4 NYSDOL Fact Sheet P725, available at: https://dol.ny.gov/system/files/documents/2021/03/p725.pdf. Note that the New York criteria is a more stringent test than the federal criteria outlined by the Department of Labor. New York incorporates the six factors in the DOL test in numbers 1-6 plus five additional factors. The DOL test is available at https://www.dol.gov/sites/dolgov/files/WHD/legacy/files/whdfs71.pdf.
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5 Minimum Wage, New York State Department of Labor, available at: https://dol.ny.gov/minimum-wage-0.
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6 USDOL Overtime Pay, available at: https://www.dol.gov/agencies/whd/overtime/.
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7 F-1 Curricular Practical Training (CPT), SEVIS Help Hub, available at:
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https://studyinthestates.dhs.gov/sevis-help-hub/student-records/fm-student-employment/f-1-curricular-practical-training-cpt.
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8 USCIS, Optional Practical Training for F-1 Students,
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https://www.uscis.gov/working-in-the-united-states/students-and-exchange-visitors/optional-practical-training-opt-for-f-1-students
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9 J1 Visa Information, available at: https://j1visa.state.gov/.
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10 For more information about the H-1B visa, see:
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https://www.uscis.gov/working-in-the-united-states/temporary-workers/h-1b-specialty-occupations-dod-cooperativeresearch-and-development-project-workers-and-fashion.
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11 For more information about the TN visa, see: https://www.uscis.gov/working-in-the-united-states/temporary-workers/tn-nafta-professionals.
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12 Workers’ Compensation Coverage in New York State, available at: http://www.wcb.ny.gov/content/main/coverage-requirements-wc/student-interns.jsp.
Disclaimer: This information is current as of May 18, 2021, is provided for educational purposes only, and is not considered comprehensive. This is not a substitute for, and should not be relied upon as, legal or professional advice; consult professional advisors, including employment lawyers if applicable, for guidance on your individual circumstances. Nothing contained herein creates an attorney-client relationship with Start Small Think Big.
