When hiring a student or a trainee, it can be tempting for some to hire and classify them as unpaid interns and thus avoid adding them to your books and payroll as W-2 employees. But beware of doing this. Unless you’re operating a bona fide internship program (that passes Washington State’s “Primary Beneficiary Test”), students and trainees in your programs should be hired as paid employees/interns, and not as unpaid interns.
Under both federal and state law, enforcement agencies and courts applying the Primary Beneficiary Test will consider the factors below in making a determination on whether somebody can be an unpaid intern, or if they are in fact an employee. The Primary Beneficiary factors below are excerpted from Department of Labor & Industries Administrative Policy ES.C.2, Hours Worked, https://www.lni.wa.gov/workers-rights/_docs/esc2.pdf, with minor edits.
1. An intern should not expect/receive compensation. The intern and the employer should 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. An intern can, however, receive a stipend or reimbursement for expenses, so long as it doesn’t amount to being a regular wage.
2. Training should be similar to training in an educational setting. The internship should provide training that would be similar to that which would be given in an educational environment, including clinical and other hands-on training provided by educational institutions.
3. The internship should tie back to the intern’s education program, e.g., receipt of academic credit. The internship should be tied to the intern’s formal education program by integrated coursework or the receipt of academic credit.
4. The training should correspond to and accommodate the intern’s academic calendar. The internship should accommodate the intern’s academic commitments by corresponding to the academic calendar.
5. The internship should be for a limited period. The internship’s duration should be limited to the period in which the internship provides the intern with beneficial learning.
6. The intern/trainee should be added to your headcount, and not displace employees. The intern’s work should complement, rather than displace, the work of paid employees while providing significant educational benefits to the intern.
7. The internship should not be a job “audition” where the intern expects a job at the conclusion of the internship. The intern and the employer understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship.
While all the factors don’t need to be satisfied, you should be able show that you satisfy most of these factors. And in most cases, unless the internship is a bona fide program tied to an academic institution, these factors will break in favor of classifying students and trainees as employees, rather than as unpaid interns.