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Misclassifying Interns Can Lead to Costly Fines & Lawsuits

Attorney Thomas Simeone was recently interviewed by fundera.com about full-time interns and whether they are considered employees, volunteers, or contractors.

Although major companies like Google, Facebook, and Twitter are known for regularly hiring interns, small businesses can also develop internship programs of their own. Internships can be beneficial to both the employer and the intern. The intern is able to earn valuable real-world experience, while the company receives a fresh perspective and an extra set of hands to help with day-to-day operations or special projects.

In fact, the number of employers offering internships has increased by 7.3 % from 2016 to 2017. With such a strong labor market, this growth is expected to continue well beyond 2018. However, before you start hiring interns for your business, there are several legal and financial concerns that you should address.

For one, interns can be classified as employees, volunteers, or independent contractors. Misclassifying an intern can result in expensive fines and costly lawsuits, which is the last thing you want to deal with as a business owner. Moreover, the designation you and the intern agree on is not binding on the government, including the IRS and state employment departments.

According to Thomas Simeone, internships generally don’t fit an independent contractor model. As attorney Simeone explains, “Many interns are unpaid or seeking experience. While those are not determinative factors, they make it more likely that an intern will be considered an employee. Rarely does an independent contractor work for free or to obtain experience. Usually, they already know what to do—as evidenced by the lack of control of the company—and are engaged in a business for profit.”

Interns are also more like employees than independent contractors because they work on-site at your company, have set hours, and work under the company’s training and supervision.

Because classifying interns can have serious implications, you should consult with a lawyer who can help you develop a solid internship program. For example, if an intern is found to be an employee, the company can be liable for back wages and penalties.

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