If you’re in the fashion business, you’ve likely considered hiring interns to help supplement your small team. While it’s a very attractive idea, there are many rules for hiring an intern that you should consider before starting an internship program.
Under the Fair Labor Standards Act of 1938, any employee of a for-profit company must be paid for their work. However, interns are not considered employees under the FLSA. That means unpaid internships are legal as long as the intern, not the employer, is the “primary beneficiary” of the work arrangement. What makes this issue so difficult is its subjectivity – interns and employers may have differing views on who benefits most from the arrangement. Couple this with the fact that many states have their own regulations, and the costs for employers can often outweigh the benefits.
This is the most important rule for hiring interns for your fashion business:
According to the The Primary Beneficiary Test, an intern is a primary beneficiary by the extent to which …
- The intern is aware that they will be uncompensated.
- Training is comparable to training received at an educational institution.
- The internship is tied to the intern’s current educational program (e.g., with academic credit).
- The internship accommodates that intern’s academic calendar.
- The internship is limited to the period during which the intern receives beneficial learning.
- The intern’s work complements (not replaces) existing employees’ work, while still providing beneficial learning.
- It is understood that the internship does not provide entitlement to a job at its conclusion.
The tricky part is that no single factor is determinative, making the test more like a set of guidelines than a list of rules.
Where the federal government fails to set any strict requirements, many state governments pick up the slack. Some make the flexible guidelines of the seven-point test mandatory, with many providing criteria of their own.
New York, for example, includes that internships must provide transferable (rather than company-specific) training and cannot be of any “immediate advantage” to the employer – even when the intern is the primary beneficiary.
In fact, as outlined by the New York State Department of Labor, “in most circumstances, interns will require employers to dedicate resources that may actually detract from the productivity of the worksite for some period,” making it virtually impossible for a company to profit from an unpaid internship.
California has one of the strictest stances on unpaid internships, requiring all programs to be conducted through and supervised by an accredited school or vocational program. Employers must also submit an internship proposal to the Division of Labor Standards Enforcement before hiring. Any internship that does not meet these standards must pay minimum wage.
Small fashion business owners should also err on the side of caution. While not required in every state, the following suggestions may be helpful in preventing disputes:
- Put all understandings about compensation and commitment in writing. Everything should be signed by both the intern and their supervisor.
- Keep a log of hours and overtime.
- Offer college credit, when possible.
- Stick to general, transferable training – do not assign grunt work.