Dispelling the Top 3 Intern Compensation Myths

Let’s start 2013 off right by dispelling three common myths about compensating your interns.

Myth #1:  “Unpaid interns are not entitled to compensation.  That’s why they are called interns!”

Fact:  An individual’s title as an “intern” does not determine whether they are entitled to compensation.  If an employment relationship exists, the “intern” must be paid. The Department of Labor has identified the following factors to evaluate whether an employment relationship exists:

• The internship is similar to training in an educational environment;
• The experience is for the intern’s benefit;
• The intern doesn’t displace regular employees;
• The employer derives no immediate advantage from the intern’s activities;
• The intern isn’t necessarily entitled to a job at the conclusion of the internship; and,
• The employer and intern understand that the intern is not entitled to wages. 

Myth #2:  “My interns are paid in one lump sum, and that sum is more than what they would make at minimum wage, so they are not entitled to overtime pay, right?”

Fact:  Eligibility for overtime does not depend on whether the employee is paid a lump sum that is greater than minimum wage.  Federal and State law require employers to pay employees overtime, unless there is an “exemption” that applies.  The most common exemptions are the so-called “white collar exemptions” that generally apply to employees who are paid on a salary basis and perform duties required to meet the exemption.  If your interns don’t qualify for these exemptions (most don’t) they are likely entitled to overtime pay for hours over 40 worked in one week.  Exempt classifications have strict (and often confusing) definitions.  If in doubt, consult your attorney to ensure your employees are classified and paid correctly.

Myth #3:  “But I give my interns meals and metro cards.  That counts towards their minimum wage, doesn’t it?”

Fact: Federal and State law provide credits against an employer’s minimum wage obligation for certain benefits furnished to employees, such as meals or lodging.  However, these credits are limited, and the amount of such credits is capped.  Neither Federal nor New York law provides an explicit credit for transportation expenses like metro cards.

Chamber member Ryan H. Nelson of Jackson Lewis LLP.

Ryan H. Nelson is an associate in the Long Island office of Jackson Lewis LLP. Mr. Nelson's practice areas include affirmative action compliance, disability and leave management, and employment discrimination law. For more information, contact him directly at (631) 247-4665 or ryan.nelson@jacksonlewis.com.