Thursday
April 24, 2014

It’s Only Temporary

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It’s Only Temporary

Before you hire an intern, know these six rules issued by the U.S. Department of Labor.

Have you heard the news reports that the Internal Revenue Service is targeting employers who misuse interns? It’s true, to a point. “We’ve seen some weird cases hitting the news,” explains Dianne Moretzsohn, an employment law expert with McCausland Keen & Buckman in Radnor, Pa. “They alarmed a lot of companies that have used interns on a regular basis. The IRS looks at larger companies that use interns a lot and where it’ll recoup more money if it cracks down. But it’s smart for smaller real estate companies to be careful, too.”

The U.S. Department of Labor has issued six rules for determining when an intern constitutes an employee, thus triggering minimum wage and overtime pay. Workers can be legally classified as unpaid interns if:

  1. They receive training similar to the type they’d get in an educational institution. Interns shouldn’t be doing mostly clerical work, says Moretzsohn. They should do tasks like shadowing salespeople, meeting with potential buyers, and attending listing appointments and closings.
  2. The work primarily benefits interns, not employers.
  3. Interns don’t displace other workers.
  4. Your company derives no immediate advantage from having interns there. Translation: Avoid having interns do work you might otherwise have to hire others to perform.
  5. There’s no entitlement to a job at the end of the internship.
  6. You and interns both understand there will be no wages associated with the internship.

There aren’t as many risks in hiring temporary employees, says Moretzsohn, as long as you contract with legitimate third-party agencies and avoid treating temps as employees. That means you don’t pay them directly and you discuss performance issues with the agency, not the temp.

“Be careful [that] your temp agency contract protects you sufficiently,” adds Moretzsohn. “There should be proper indemnification language protecting your company if the temp seeks unemployment or workers compensation benefits.”

One more tip pertaining to short-term hires:  Be careful when classifying temps as independent contractors. “The tendency is to want to put a worker in an independent contractor category to avoid paying benefits and withholding obligations, and there’s a real danger in that,” says Moretzsohn. “That’s an area the IRS is cracking down on. It really boils down to the degree of control you exercise. If you control the where, when, and how workers do their work, they’re likely employees.”

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