An important distinction between employees and interns

Over recent years “Generation Praktikum” (generation of interns) has become an established and familiar term in Germany.

In the upcoming holiday season a lot of businesses, in nearly all industry sectors, will hire interns. Internships often last several months in which no compensation or only a small reimbursement of expenses is received by the individual. Interns are willing to accept these conditions because they hope to gain better access to the job market through the work experience gained. However, companies are often accused of exploiting young professionals as a low budget work force in this way.

The recent judgment of the local labor court in Bochum, Germany (decision made March 25, 2014, reference number 2 Ca 1482/13) has shown some of the financial risks that employers may face when offering internships. In this particular case a supermarket chain ordered an intern to fill up the shelves, work at the check-out-point and the warehouse without compensation for eight months. The labor court decided that this could not be defined as an internship but as an employeremployee relationship. As a result, the supermarket chain had to pay € 17,000 in backdated wages.

Companies should seek legal advice in advance of employing interns in order to determine whether the job would be regarded as an internship or as an employer-employee relationship. The job title “internship” is not sufficient to make this determination. The type of tasks the individual performs is the deciding factor. If a company is providing the intern an insight into daily business and professional activities, then the relationship is most likely an internship. This is more likely when the internship forms part of the intern’s studies or vocational training. If there is a true internship, compensation does not have to be paid and no employer-employee relationship is created. However, if the focus of the work/activity lies in the fulfillment of tasks which would usually be done by employees, it will not be considered an internship but rather an employer-employee relationship.

Under German law employment contracts are not required in written form, but can be negotiated orally or implied by work performance. Therefore, there is a risk for companies in hiring what they consider to be interns, to be obligated to pay salaries if in fact an employer-employee relationship exists. Wages are measured by the normal level of remuneration paid for the type of tasks undertaken by the individual. Furthermore, the employment of a so-called intern, who in fact must be regarded as an employee, has the same legal consequences for the employer as the hiring of an employee, particularly concerning dismissal protection law. If an intern works in a company in which more than ten employees work on a regular basis, and if the intern works longer than 6 months, he/she can only be dismissed if one of the legal causes for termination under the German General Unfair Dismissal Act applies. In the above mentioned case, the duration of the so-called internship was eight months and so the individual was able to rely on the general protection against dismissals.

Companies who hire interns should be aware of the legal distinction between an internship on the one hand and an employer-employee relationship on the other hand, and understand the potential associated risks. The fact that interns gain real life work experience during the internship yet is not harmful. However, it is important for companies to employ interns in moderation and to avoid the temptation of exploiting interns in order for existing employee work to be done in an economically inexpensive way.