Human Resource Services News

: : Karen Randle, Director, Human Resource Services
631.923.1595 ext. 334
G.R. Reid Consulting Services, LLC

 

 

Classifying Independent Contractors and Student Interns

Often times, employers misclassify independent contractors and student interns. The Fair Labors Standards Act breaks down how to classify whether or not a person working you is an independent contractor, or student intern, or none of these. 

Independent Contractors:
The U.S. Supreme Court has indicated that there is no single rule or test for determining whether an individual is an independent contractor or an employee of an organization for the purposes of FLSA, but it is the total activity or situation that controls this determination. Below are factors that have been considered significant in coming up with a determination.

1) The extent to which the services rendered are an integral part of the principal's business.
2) The permanency of the relationship.
3) The amount of the alleged contractor's investment in facilities and equipment.
4) The nature and degree of control by the principal.
5) The alleged contractor's opportunities for profit and loss.
6) The amount of initiative, judgment, or foresight in open market competition with others required for the success of the claimed independent contractor.
7) The degree of independent business organization and operation.

Factors such as the time or mode of pay, where the work is being performed, the absence of a formal employment agreement, or whether an alleged independent contractor is licensed by state or local government, do not have bearing on determining the employment relationship. If an independent contractor does not meet the criteria above and it is determined that the employment relationship does not qualify the individual as an independent contractor, the employee must be paid according to the Fair Labor Standards Act. If an independent contractor is misclassified and should be paid according to the FLSA and is not, the employer may be subject to paying taxes. Lastly, there are more specific classifications that some employers must look into, like if it is an individual working as a farmer, or an electrical contractor, or if an individual is volunteering their time.

Student Interns:
When classifying an individual as a student intern, there are six criteria that must be applied,

1. The internship, even though it includes actual operation of the facilities of the employer, is similar to training which would be given in an educational environment;
2. The internship experience is for the benefit of the intern;
3. The intern does not displace regular employees, but works under close supervision of existing staff;
4. The employer that provides the training derives no immediate advantage from the activities of the intern; and on occasion its operations may actually be impeded;
5. The intern is not necessarily entitled to a job at the conclusion of the internship; and
6. The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

If an employer structures the internship program around a classroom or academic setting, or provides the intern with skills that can be used in multiple employment settings, the individual will be viewed as receiving training. If an employer benefits from the interns’ work such as performing productive work such as filing, or assisting customers, then the individual may qualify for minimum wage and overtime pay as per the FLSA standards. Additionally, internships should be for a fixed amount of time established ahead of time. Unpaid internships should not be used as a trial period before hiring the employee or it will fall under the FLSA standards of employment.

It is important to consider these criteria for determining whether or not an individual is considered an independent contractor or a student intern to ensure that all FLSA standards are being followed. For additional information on independent contractor or student internships, www.dol.gov can be visited.