Interns and Students in The Workplace
One important question for employers—and for interns and students—is whether interns and students working for for-profit employers are entitled to minimum wage and overtime pay under the Fair Labor Standards Act (FLSA).
FLSA Requirements
The FLSA is a federal statute that requires for-profit employers to pay employees for their work. Interns and students, however, may not be employees under the FLSA—in which case the FLSA does not require compensation for their work.
The Test for Unpaid Interns and Students
Courts have used the primary beneficiary test to determine whether an intern or student is, in fact, an employee under the FLSA. In short, this test allows courts to examine the economic reality of the intern-employer relationship to determine which party is the primary beneficiary of the relationship. Courts have identified the following seven factors as part of the test:
1. The extent to which the intern and the employer clearly understand that there is no expectation of compensation. Any promise of compensation, express or implied, suggests that the intern is an employee—and vice versa.
2. The extent to which the internship provides training that would be similar to that which would be given in an educational environment, including the clinical and other hands-on training provided by educational institutions.
3. The extent to which the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit.
4. The extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic calendar.
5. The extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning.
6. The extent to which the intern’s work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern.
7. The extent to which the intern and the employer understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship.
Courts have described the primary beneficiary test as a flexible test, and no single factor is determinative. Thus, whether an intern or student is an employee under the FLSA necessarily depends on the unique circumstances of each case.
If analysis of these circumstances reveals that an intern or student is actually an employee, they are entitled to both minimum wage and overtime pay under the FLSA. On the other hand, if the analysis confirms that the intern or student is not an employee, they are not entitled to either minimum wage or overtime pay under the FLSA.
In Texas, as in other states, the Fair Labor Standards Act (FLSA) governs whether interns and students working for for-profit employers are entitled to minimum wage and overtime pay. The FLSA requires that employees be compensated for their work, but interns and students may not always be considered employees under the FLSA. The determination hinges on the 'primary beneficiary test,' which assesses the economic reality of the intern-employer relationship to identify the primary beneficiary. This test includes seven factors, such as the expectation of compensation, the educational nature of the internship, the integration with formal education, the accommodation of academic commitments, the duration of the internship, the complement to paid employees' work, and the lack of entitlement to a paid job post-internship. No single factor is decisive; the totality of circumstances must be considered. If an intern or student is deemed an employee after this analysis, they are entitled to minimum wage and overtime pay under the FLSA. If not, they are not entitled to such compensation. Texas employers must carefully evaluate internships against these criteria to ensure compliance with the FLSA.
