In the latest Weekly Wright Report:
- Revisiting an Old Problem – read now
- State Contractors, Be Prepared: Maryland’s Responsible Payment of Employee Health Care Expenses Effective July 1 – read now
Revisiting an Old Problem
by Don Walsh
While summer rolls in, students leave school and parents frantically search for ways to keep their children busy over the summer, many employers look to bring on interns. Whether the student is there to help with nagging work projects employers keep putting off, take on a new project or just supplement the workforce while other employees go on vacations, employers need to be aware of the rules for hiring interns.
In addition to making sure the intern is covered under worker’s comp policies, avoids dangerous equipment which they may be too young to operate and has any background checks performed in case the intern is working with minors, employers have to wrestle with whether the interns should be paid an hourly wage. Following pressure from numerous judicial decisions from around the country, the Department of Labor has adopted the “primary beneficiary test” to determine whether an intern is, in fact, an employee under the Fair Labor Standards Act. This test allows courts to examine which party is the “primary beneficiary” of the relationship based on seven general factors:
- The extent to which the intern and the employer 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.
- The extent to which the internship provides training that would be similar to that which would be given in an educational environment, including the clinical and other hands-on training provided by educational institutions.
- The extent to which the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit.
- The extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic calendar.
- The extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning.
- The extent to which the intern’s work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern.
- The extent to which the intern and the employer understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship.
Courts have described the “primary beneficiary test” as a flexible test, where no single factor is determinative. If analysis of these circumstances reveals that an intern is actually an employee, then he or she is entitled to both minimum wage and overtime pay under the FLSA and the employer is required to maintain clear records of hours worked, payroll, and ensure taxes are collected and paid.
For help determining whether your company’s internship program should compensate for work performed, please reach out to a WCS attorney.
State Contractors, Be Prepared: Maryland’s Responsible Payment of Employee Health Care Expenses Effective July 1
All contractors and sub-contractors bidding on state construction projects need to be aware of Senate Bill 433 from the 2019 Maryland legislative session. Despite significant concerns related to the constitutionality of some of its provisions, it takes effect on July 1, 2019. Senate Bill 433, the “Responsible Payment of Employee Health Care Expenses” law, provides that any bidder, contractor, or subcontractor on a State-funded construction contract must demonstrate the payment of employee health care expenses. Companies must do so by submitting certification or a valid contract to DGS or MDOT that shows that, for employees who will work on the construction project:
• the employer pays aggregate employee health care expenses of at least 5% of the wages paid by the employer; or
• the employer pays 50% or more of the required premium necessary to obtain coverage by a credible health insurance plan.
Beyond the certification form, a procurement officer may also require a responsible bidder or subcontractor to submit records that are sufficient to support the certification required by the law. Under the law, DGS, MDOT, and the DLLR must collaborate on the development of a certification form but it is not clear that a certification form will be available ahead of the effective date of the law.
The law exempts small businesses with fewer than 30 employees and Minority Business Enterprises (“MBEs”) from coverage. The permissibility of the exemption for MBEs has already drawn scrutiny, including a letter opinion from the Attorney General of Maryland suggesting that the exemption for MBEs is unconstitutional.
Beyond the constitutional issues, the law creates a number of questions and issues for employers. Based on the language of the statute, it is unclear whether employers are required to simply offer to pay 50% of the required premiums to obtain coverage or whether all of the employees on the project are required to actually be insured by the employer’s plan. The second reading creates a serious issue – how can employers mandate that their employees purchase their health insurance from them? Second, the bill creates another avenue for contractors to protest bids by contesting whether the winning bidder meets the law’s requirements. Finally, the law only provides that a procurement officer may void a contract if the awardee fails to provide requested documentation but does not mandate it. This creates serious questions about whether the law will be enforced consistently.
If you have any questions about Senate Bill 433, its impact or help complying with the new law, please contact Gregory Currey.
Want more? Visit the Weekly Wright Report page to browse past issues.