Covering Your Next Generation: Unpaid Interns and Workers’ Compensation

Providing internship opportunities is a great way to find capable and skilled young workers who can add value to your organization. It is also an opportunity for you to help tomorrow’s industry professionals gain experience, develop skills, forge connections, strengthen their resumes, and assess their interests and professional abilities.

There are many rules and regulations concerning the implementation of internship programs and determining eligibility for who can be considered an unpaid intern. With so many regulations to comply with, organizations might not consider how unpaid interns would be covered when it comes to workers’ compensation claims.

In Colorado, workers’ compensation coverage for unpaid interns is required by law. Since they are unpaid, claimants could potentially receive medical benefits coverage, but not lost wages.

However, case law has determined that an unpaid intern is eligible for monetary payment of medical impairment ratings. This is achieved by establishing an average weekly wage determined from a class of employee that has been deemed equivalent to the intern’s position.

But who exactly is responsible for covering the costs of workers’ compensation for unpaid interns? That depends on whether or not the intern is actively participating in an internship program through an educational institution. If they are, then the injured party would be covered under their school’s workers’ compensation and liability coverage, not the employer’s. The rules are spelled out in Article 40, Section 7 (a) of Colorado’s General Provisions for Injured Workers, which we’ve included in the sidebar.

While many organizations don’t pay hourly wages or salaries to interns, they do give them perks such as ski passes, gym memberships, tickets to events, paid trips, stipends, or a nominal lump sum payment at the conclusion of the internship. It’s important to note that these are all considered “pay” under workers’ compensation statutes in the Inclusion/Exclusion of Payroll rules, so employers need to be prepared when bringing on interns and recognize they may have to pay workers’ compensation contributions associated with their interns’ “employment.”

Giving local students and recent graduates an opportunity to gain initial work experience can forge connections that benefit your organization now and in the future. Internship programs can give your organization an edge in the search for top talent and creates an extended “interview” process to determine whether or not an applicant is good long-term fit. Ensuring that new employees are a good fit increases employee retention rates, and interns help increase workplace productivity by providing teams with additional short-term support.

It’s not just having the extra hands on deck that make hiring interns advantageous. New people bring with them fresh ideas, new perspectives, and specialized strengths and skill sets that your team might have been lacking. Clearly, there are many benefits to hiring unpaid interns, but it pays to know the applicable laws and regulations to prepare for how they may affect your district’s bottom line.

If you employ interns who are currently students, it’s advisable to confirm that their educational institution will cover the costs of workers’ compensation coverage. If there’s a reason why the institution doesn’t cover these costs, or if your interns are not actively students at an educational institution, your district is responsible for workers’ compensation costs based on wages corresponding to the pay of an actual employee doing a similar job.

The Fine Print…

What does Colorado Law actually say about Worker’s Compensation and Unpaid Internships?

Article 40, Section 7 (a) of Colorado’s General Provisions for Injured Workers states: Any employer, as defined in section 8-40-203, who enters into a bona fide cooperative education or student internship program sponsored by an educational institution for the purpose of providing on-the-job training for students shall be deemed an employer of such students for the purposes of workers’ compensation and liability insurance pursuant to articles 40 to 47 of this title.

(b) If the student placed in an on-the-job training program does not receive any pay or remuneration from the employer, the educational institution sponsoring the student in the cooperative education or student internship program shall insure the student through the institution’s workers’ compensation and liability insurance or enter into negotiations with the employer for the purpose of arriving at a reasonable level of compensation to the employer for the employer’s expense of providing workers’ compensation and liability insurance while such student is participating in on-the-job training with said employer.

(c) As used in this subsection (7), “cooperative education or student internship program” means a program sponsored by an educational institution in which a student is taught through a coordinated combination of specialized in-the-school instruction provided through an educational institution by qualified teachers and on-the-job training provided through a local business, agency, or organization or any governmental agency in cooperation with the educational institution.

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